Macro economic objectives - Balance of Payments Flashcards
What is the balance of payments (BoP)
a record of all financial transactions between UK and rest of world
Which account does the BoP focus on
current account records imports and exports
What does the balance of trade focus on as part of the current account
sale and purchases of physical goods between Uk and world
what do exports refer to in balance of trade +
What is it in the BoP
the GaS sold to foreign countries -
is a + in BoP
What do imports refer to in balance of trade +
what is it in the BoP
the Gas bought from foreign countries -
is a - in BoP
What does it mean when the current account is in deficit
the value of exports<imports - leaking money
what does it mean when the current account is in surplus
the value of exports>imports
what is an important equation to know in this topic
AD = C + I + G + (x-m)
What is a credit
when money flows in
what is a debit
when money flows out
How can we tell apart exports and imports
if the money benefits the UK its an export
if the money leaves its an Import
The current account focuses on the net effectof which 4 things
trade in goods
trade in services
transfer payments (i.e secondary incomes)
investment profits leaving UK
What does a deficit cause
increased gov borrowing
increased debt so increase debt
exchange rate down
What can cause BoP/balance of trade to change (5)
Economic Growth
Inflation
Competitiveness
De industrialisation
Status of currency
What are the gov policies to influence BoP (3)
Fiscal
Monetary
Supply -side
