ECON4 Balance of Payments

Question 1

What is the balance of payements split into

Answer 1

current accountfinancial account capital account

Question 2

What is in the current account

Answer 2

net trade (visibles and invisibles)

Question 3

Whats in the capital account

Answer 3

government and foreign transfers

Question 4

whats in the financial account

Answer 4

investment incomeFDI

Question 5

What is the sum of the balance of payments

Answer 5

0

Question 6

What do countries have underlying current account surpluses or deficits?

Answer 6

natural resourcesunderlying competitivenessexchange ratesinflationspending by consumers/government

Question 7

Positives of a current account deficit

Answer 7

financial liberation (more FDI)Partial auto-correction (may be corrected buy business cycle)Investment and supply side (tooling up)Capital inflows (low IR can finance)

Question 8

Problems of a current account deficit

Answer 8

structural weaknessunbalanced economyloss of output (withdrawal)Problems with financing (FDI unreliable)downward pressure on exchange rate

Question 9

3 types of method for tackling the balance of payments?

Answer 9

demand managementCurrency adjustmentsupply side

Question 10

Types of demand management

Answer 10

expenditure switchingmonetary policy