14.3 - balance of payments

Question 1

What is the balance of payments?

Answer 1

a record of all the currency flows into and out of a country in a particular time period

Question 2

What are the three types of account in the balance of payments?

Answer 2

• current
• capital
• financial

Question 3

What is the current account?

Answer 3

measures all the currency flows into and out of a country in a particular time period in payment of exports and imported goods/services (together with primary and secondary income flows)

Question 4

What is the financial account?

Answer 4

the part of the balance of payments which records capital flows into and out of the economy

Question 5

What are the four components of the current account?

Answer 5

• balance of primary income
• balance of secondary income
• current account deficit
• current account surplus

Question 6

What is the balance of primary income?

Answer 6

inward income flowing into the economy in current year, by UK owned capital assets overseas and outward flows

Question 7

What is the balance of secondary income?

Answer 7

current transfers flowing into/out of the UK economy in a particular year

Question 8

What is the current account deficit?

Answer 8

when currency outflows in the current account exceed the currency inflows

Question 9

What is the current account surplus?

Answer 9

when currency inflows in the current account exceed the currency outflows

Question 10

What are the factors that influence a country’s current account balance?

Answer 10

• productivity
• inflation
• exchange rate