deficits and surplus Flashcards
1
Q
current account
A
main measure of external trade performance
2
Q
financial account
A
measures inflows and outflows of financial capital across national boundaries
3
Q
capital account
A
- transfers of ownership of fixed assets
- sale/transfer of patents, copyrights, franchises, leases and other transferable contracts
4
Q
causes of UK trade deficit
A
- uncompetitive goods
- loss of raw materials
- exchange rates (spiced)
- inelastic demand for imports (food and fuel)
- decline in manufacturing
- growth of emerging markets
5
Q
when was the UK last running a surplus?
A
2000
6
Q
structural causes of current account deficit
A
- under investment
- low productivity
- inadequate R&D
- emergence of lower cost competition
7
Q
cyclical causes of current account deficit
A
- over valued exchange rate
- boom in domestic demand
- recession in key export markets
- slump in global export price
- increased demand for imported technology
8
Q
structural vs cyclical
A
structural - long term, supply side
cyclical - short term, demand side
9
Q
effects of current account deficit
A
- net outflow of AD from circular flow is a drag on real GDP growth
- loss of jobs in exporting sectors (negative multiplier)
- fall in foreign exchange reserves
- can lead to exchange rate weakness
- problems financing debt
10
Q
policies to reduce the deficit
A
- exchange rate policy
- monetary policy
- fiscal policy
- supplyside policy
- protectionism
- gov investment
- deflationary policy
- currency controls
11
Q
why do some countries have a high surplus?
A
- export orientated growth
- FDI
- high domestic savings
- closed economy
- strong income from overseas investment
12
Q
impacts of a surplus
A
- contributor to GDP
- accumulation of foreign exchange reserves
- might cause demand pull inflation
- pressure on currency to appreciate
