economics topic 3

Question 1

Define Balance of Payments

Answer 1

Set of accounts that record financial flows between Australia and the rest of the world over a period of time.

Question 2

What are the two payment account types

Answer 2

Current Account and Capital & Financial accounts.

Question 3

Define a current account and what it can be divided into.

Answer 3

The current account shows the net amount a country is earning if it’s in surplus, or spending if it’s in deficit.
Goods, Services and Income

Question 4

Define a capital and financial account and what it factors.

Answer 4

The capital and financial account records the net change in ownership of foreign assests.
Direct Investment, Portfolio investment, other investment and Reserve Assets.

Question 5

Define the balancing item.

Answer 5

The balancing item is simply an account that accounts for any statistical errors and assures that the current and capital accounts sum to zero. Also referred to as net errors and omissions.

Question 6

Define the goods balance:

Answer 6

Goods (physically traded product)
Goods Balance refers to the difference between what Australia receives for exports & what is paid for imports.

Question 7

Define services balance:

Answer 7

Services: Intangible trade like tourism
Service Balance refers to the difference between what Australia earns from services & what is paid for importing services.

Question 8

Define Primary Income (CA):
what does it include?

Answer 8

Primary income (investment income) comes from Australia-owned assets (credits) minus payments on foreign-owned assets in Australia (debits). Includes wages, interest on borrowings, investment returns, profits and dividends.

Question 9

Define Secondary Income:
what is included?

Answer 9

Represents