Balance of Payments (Lesson 5)

Question 1

Define Balance of Payments

Answer 1

An account of all transactions between the citizens of one country and the rest of the world.

Question 2

Define Current Account

Answer 2

Flow of goods and services between one country and the rest of the world.

Question 3

Define Capital and Financial Account

Answer 3

All financial assets between one country and the rest of the world.

Question 4

Define Foreign Direct Investment

Answer 4

When one country decides to make an investment in another.

Question 5

Define Portfolio Investment

Answer 5

Movements of capital across boarders in the market.

Question 6

Define Other Investments

Answer 6

Outstanding financial investments.

Question 7

Define Primary Income

Answer 7

Money earned overseas/ investments owned by UK residents.

Question 8

Define Secondary Income

Answer 8

Money from government to international organisations.

Question 9

Balance of Payments Equation

Answer 9

Current Account + Capital Account + Financial Account.

Question 10

Current Account Equation

Answer 10

Primary Income + Secondary Income.