T6 BoP Flashcards
What is the balance of trade
The measure of net exports of goods and services
Is the balance of trade an amount or a value
Value
What are the main sections of the balance of payments current account(3)
Balance of trade
Primary icnome - netflows of FDI that generate profit
Secondary income - donations, etc from other countries
What affects does the BoP have on AD
When in a deficit AD will fall
When in a surplus AD will rise
What is a balance of trade deficit
Where the value of imports is greater than ecports
What are the affects of a trade deficit(3)
Falling comparative advantage
Over/under valued exchange rates -
Withdrawals fromthe economy
What is significant about a trade surplus(4)
Increased GDP Could cause DP inflation Increase in foreign exchange reserves Changes the ER Possible increase in trade protectionism
What influences the current accoutn(4)
Consumer import spending Capital flows from abroad Relative eco growth Saving rates Comp/Productivity Inflation rates Interest rates and the exchange rate
Effects of indward investment(4)
increase in GDP Jobs Inc in productive capabilites Access to new tech Increase in domestic production A better capital accoutn - increased primary income on the current account Makes up for the lack of domestic development SUPPLY SIDE GROWTH
What can affect FDI flows(4)
The stage the economy is in on the economic cycle Economic expectations Legislations Taxes Interest Rates Incentives Domestic wages
What are some supplyside polices to reduce a deficit(4)
Anything that lowers COP, and increases international comp and compartive advantage
Demand side policies to deal with a deficit
Inc gov spending Lower interest rates Lower taxes Higher tarrifs Changes of tarrifs and quotas A lower exchange rate Lower availability
Dangers of a persistent defiit
Lower Ad, Lower growth Dec standards of living Loss of domestic jobs Currency weakness Decreased domestic competitivness Loss of investor confidence
What are expenditure reducing policies
Policies aimed to reduce AD and real incomes to lower the demand for imports
What are expenditure switching policies
Policies aimed to switch spending on imports to the local economy and boost exports
