BOP Flashcards
- Components of the Current Account
The components of the Current Account are: trade in goods, trade in services, investment income and current transfers.
- Reasons for demergers
- Demergers reduce diseconomies of scale.
- Demergers enable each new separate firm to specialise.
- A firm can sell one of its demerged divisions and its assets to raise funds.
- Demergers reduce conflicts between different cultures within a firm.
- Investment Income
A component of the Current Account which includes any rent or profit earned on an investment made abroad.
- Current Transfers
When money is transferred abroad without getting any goods or services back in exchange.
- Current Account Deficit
When total outflows from the current account are greater than total inflows.
- Trade Balance
Total value of exports minus total value of imports.
- Expenditure Reducing Policies
Policies which aim to reduce expenditure on all goods in order to reduce import expenditure and improve the current account.
- Expenditure Switching Policies
Policies which aim to switch expenditure from imported goods to domestic goods. They include trade barriers and low-interest rates.
what is the 3 things involved in the financial account
- portfolio investment (bonds,shares)
- FDI
- Reserves - gold
- 4 consequences of a current account deficit
- 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
country with low inflation
- st lucia - 0.1