Current Account of The Balance of Payments

Question 1

What is the Balance of Payments?

Answer 1

(BOP) is compiled in every country in the world following a standard template recommended by the IMF.

It is a simple credit/debit book of exports and imports.

Question 2

What is the Current Account

Answer 2

It is the overall balance of the trade in goods & services, income and current transfers.

Question 3

What is a Current Account Deficit?

Answer 3

It is when the combined debit items included in these 4 categories exceed the credit items.

Question 4

What is a Current Account Surplus?

Answer 4

It is when the combined debit items……..

Question 5

What are the Components of the Current Account?

Answer 5

1. Trade in goods (Tangible)
2. Trade in services (Intangible)
3. Income
4. Transfers

Question 6

What is the component of Income made up of?

Answer 6

It measures the flow of income entering or leaving the country (Remittances)

Question 7

What is the component Transfers made up of?

Answer 7

Government Transfers - contribution of aid to developing countries, transfers by private individual.

Question 8

What are the two modes of the Current Account?

Answer 8

Surplus and Deficit

Question 9

What is the Trade in Goods Balance made up of?

Answer 9

Revenue from Exports - Revenue from Imports

Question 10

What is the Trade in Services Balance made up of?

Answer 10

Revenue from Exported Services - Revenue from Imported Services

Question 11

What is the Net Investment Income?

Answer 11

Profits, interests, dividends earned on direct investment abroad & FDI earnings

Question 12

What is Net Overseas Transfers/ Current Transfers?

Answer 12

These are payments made and receipts received which there is no corresponding exchange of an actual good or service

Question 13

What are the polarities in the Current Account?

Answer 13

Debit (-); Credit (+)