Unit 2 Balnce Of Payment Flashcards
Is the Uk an open or closed economy?
Open. As the UK has a free market and trade with other countries (as long as it is legal)
What is balance of payments?
Is a record of international payments over a course of a year
Shows the imports and exports
Compiled by the ONS (office of national institute)
What is the current account?
The main component of the balance of payments
Records transactions in present year (except for investments)
Why are the 4 sections of the current account?
Trade in goods
Trade in services
Investment income
Transfer payments
What are imports?
Bringing goods and services from a abroad to sell in own country
What are exports?
Send goods and services to sell abroad
Trade in goods? Examples?
Measures the movement of tangible goods across international borders
Examples: raw materials
Trade in services?
Advantage?
Examples?
UK leads the world in finance as they advise people to take over countries
Advantage : leads to money coming into the UK
Example: insurance, banking, transport
Investment income?
MONEY MADE FROM CAPITAL ABROAD
Example: having a business outside UK is advantage as money comes back into the country
Transfer Payments?
Foreign Aid
Migrants sending money back home
Give EU tax
Current Account Deficit?
Occurs when money is flowing out of country due to a rise in imports of goods and services
When the rate of inflation is higher then other countries why is it a current account deficit?
Makes the country less competitive. Exports fall and imports become cheaper and rise
What are the 4 reasons why current account deficit happens?
1) Higher inflation rates compared to other countries
2) Huger wage costs compared to other countries
3) high level of growth in country
4) currency is stronger than other countries
Why does high level of growth in country cause current account deficit
People that high incomes decide to by more imports from abroad
