BOP Flashcards
1
Q
BOP definition
A
Records all financial transactions made between consumers, businesses and the government in one country with other nations
2
Q
Current Account
A
Measures the difference between between money and credit going in and out of an economy
3
Q
What is the Current Account comprised of?
A
- Trade Balance in Good
- Trade Balance in Services
- Net primary income from oversea assets
- Net Secondary income (debt relief)
4
Q
Current Account deficit
A
- external deficit
- net outflow of income from the country’s circular flow
- debtor countries
5
Q
Current Account surplus
A
- external surplus
- net inflow of income
- creditor nations
6
Q
Causes of current account deficit
A
- Poor price + non-price competitiveness (e.g. higher relative inflation than a nation’s trading partners)
- Strong exchange rate affect exports + imports (increases the prices of exports)
- Recession in one or more trade partner countries (cuts value of exported G + S)
- Volatile global prices (exporters of primary commodities)
- Booming domestic economy (domestic producers need to import more)
