Balance of payments / trade

Question 1

What are the accounts of the balance of trade?

Answer 1

Current account , Financial account , Capital account

Question 2

Definition of a current account surplus/ deficit

Answer 2

Current account surpluses refer to positive current account balances, meaning that a country has more exports than imports of goods and services

Current account deficit refers to a negative account balance , meaning a country that a country has more imports than exports .

Question 3

What are the macro-economic objectives

Answer 3

T-Trade( Balance of payments)
I-Inflation (+/- 2%)
G-Growth
E-Employment
R-Redistribution of income

Question 4

What are the main influences of net trade?

Answer 4

real income , exchange rates , world economy , non-price factors , protectionism(Tariffs on foreign goods)

Question 5

What is the definition of the circular flow of income?

Answer 5

exchanges are represented as flows of money, goods and services, etc. between economic agents.

Question 6

What are the causes of inflation?

Answer 6

Demand pull inflation, cost push inflation, depreciation of the pound

Question 7

What is the Marshall-leaner condition

Answer 7

PED Imports + PED Exports

Question 8

Difference between capital and current expenditure?

Answer 8

Current involves everyday purchases, while Capital involves long-term infrastructure projects.

Question 9

What are 3 main causes of a current account deficit?

Answer 9

strong currency, low productivity, high inflation

Question 10

What is the difference between a cyclical budget deficit and structural budget deficit?

Answer 10

Cyclical occurs when economy is in recession (during a recession)

Structural occurs when economy is operating at full capacity , government spending more than revenue