BOP

Question 1

Explain the term current transfers

Answer 1

When money is transferred abroad without getting any goods or services back in exchange

Question 2

What is the term used to describe money transferred home from relatives working abroad

Answer 2

Remittances

Question 3

What are the 2 main sections of the balance of payments

Answer 3

Current, financial and capital account

Question 4

What are the 4 parts of a current account

Answer 4

Trade in goods, trade in services, investment income, current transfers

Question 5

What is the current account and what doesn’t measure

Answer 5

A part of the balance of payments which measures trades in gods and services , investment income and current transfers

Question 6

Define balance of payments

Answer 6

A record of payments between one country and the rest of the world

Question 8

What is the capital and financial account and what does it measure

Answer 8

Part of balance of payments and tracks investment into and out of a county

Question 9

Define current account surplus

Answer 9

Current account is in surplus when inflows are greater than outflows so it is a positive number

Question 10

Define current account deficit

Answer 10

Current account is in deficit when outflows are greater than inflows and so is a negative number

Question 11

What is current account equilibrium

Answer 11

When the inflows and outflows form the current account are equal
When the current account is at 0

Question 12

What happens to the current account when the pound depreciates

Answer 12

The current account increases which improves our deficit

Question 13

What affects a country’s current account

Answer 13

Exchange rates
Relative inflation
Costs
Quality
National income

Question 14

What happens to prices when a country has a high inflation rate relative to competitors

Answer 14

Prices go up more relative to competitors which decrease export revenue, decreasing their current account

Question 15

Why would a countries export get more expensive

Answer 15

If a county has a high exchange rate, high relative inflation and high costs

Question 16

What happens to expenditure and the current account as consumers import more normal goods

Answer 16

Import expenditure will increase, which means the current account will decrease

Question 17

What happens if national income increases

Answer 17

Consumers import more normal goods and the current account decreases