Balance of Payments defintions Flashcards
Balance of payments (1)
A statement of all the financial transactions between the UK and the rest of the world (1)
Current account (3)
A statement of the transactions relating to the balance of trade (goods and services exports less imports) (1), net income from abroad (1) and net current transfers (1)
Capital account (3)
The capital account is a very small component of the balance of payments. It typically includes transfers that are one-way flows (1), such as gifts as opposed to commercial exchanges (1). For example debt forgiveness to LEDCs is recorded in the capital account (1).
Financial account (4)
The financial account include transfers of assets (1) not included within the capital account. This would include buying and selling of private sector assets held in other countries (1), foreign direct investment (1), global monetary flows related to investment in business, real estate, bonds and stocks (1).
Balance of trade (3)
This forms a major component of the current account (1). The balance of trade measures net exports (1). It is the value of exports – value of imports (1).
Trade deficit (2)
This is sometimes referred to as a trade gap (1). This is where the value a country’s import of goods and services exceeds the export of goods and services (1). This is the same as a negative figure for net exports.
Trade surplus (3)
This is where the value of a country’s export of goods and services is greater than the import of goods and services (1). This is the same as a positive figure for net exports (2)
Overseas income (2)
This is also sometimes referred to as investment income (1). It is money going in (credit) or out (debit) of a country as income from portfolio investments (in the form of dividends, for example) or form some other kind of investment (1)
Current transfers (3)
This is a component of the current account (1). These are transfers that occur between countries with nothing received in return (1). A good example is international aid (1).
