BOP Flashcards

1
Q
  1. Components of the Current Account
A

The components of the Current Account are: trade in goods, trade in services, investment income and current transfers.

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2
Q
  1. Reasons for demergers
A
  1. Demergers reduce diseconomies of scale.
  2. Demergers enable each new separate firm to specialise.
  3. A firm can sell one of its demerged divisions and its assets to raise funds.
  4. Demergers reduce conflicts between different cultures within a firm.
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3
Q
  1. Investment Income
A

A component of the Current Account which includes any rent or profit earned on an investment made abroad.

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4
Q
  1. Current Transfers
A

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

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5
Q
  1. Current Account Deficit
A

When total outflows from the current account are greater than total inflows.

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6
Q
  1. Trade Balance
A

Total value of exports minus total value of imports.

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7
Q
  1. Expenditure Reducing Policies
A

Policies which aim to reduce expenditure on all goods in order to reduce import expenditure and improve the current account.

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8
Q
  1. Expenditure Switching Policies
A

Policies which aim to switch expenditure from imported goods to domestic goods. They include trade barriers and low-interest rates.

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9
Q

what is the 3 things involved in the financial account

A
  • portfolio investment (bonds,shares)
  • FDI
  • Reserves - gold
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10
Q
  • 4 consequences of a current account deficit
A
  • finance debt through more bonds, higher interest rates due to uncertainty
  • uncertainty means ppl selling off £s leading to a depreciation
  • AD shifts inwards
  • increases supply of money - lowering value
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11
Q

country with low inflation

A
  • st lucia - 0.1
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