C36 Balance of Payments Flashcards
What is the balance of payments?
A record of the flow of money into and out fo a country
What is the UK BOP made of?
The current account, Capital account, financial account
What are trade-in goods?
Visible goods
(the UK mainly imports machinery and pharmaceuticals and exports machinery and fuels)
What are trade-in services?
Imports and exports of services
Uk imports tourism
UK exports banking and insurance
What are investment and employment for BOP?
Investing in foreign things can lead to cash inflow for the UK
Salaries paid to UK citizens from abroad can lead to cash inflow for the UK
What are transfers?
Movement of money between countries that aren’t for goods or services
What causes BOP defecits?
High consumer spending on imports
Can’t compete internationally leading to no exports (less technologically developed)
External shocks
Currency Appreciation
What causes DOP surplus?
Recession (fall in imports)
Low-value currency (cheaper exports)
High-interest rates (more saving)
How do governments correct imbalances?
Use of policies
Restriction of imports
Devlaue or Raise currency value
What are the drawbacks to government correction of imbalances?
May cause decrease in global efficiency
May break the WTO agreements
How are international economies interconnected?
Internation trade and capital flow mean that governments have invested in a lot of countrties
Countries are more dependant on each other and their economic welfare
