Balance of payments Flashcards

1
Q

Why is booming domestic economy bad?

A

1.Domestic producers need to import raw materials from abroad
2.More imports
3.Increases in prices

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2
Q

Why is a volatile global prices bad?

A

Exprorts of primary commodities might be hit by a fall in global prices

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3
Q

Why is a strong exchange rate bad?

A

1.High currency value means prices of exports increase so you sell less
2.Imports cheaper, don’t buy from uk

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4
Q

Why is poor price and non price competitiveness an issue?

A

1.Higher inflation
2.low levels of capital investment
3.Low labour productivity

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5
Q

5 causes of a current account deficit

A

1.Poor price and non-price competitiveness
2.Strong exchange rate
3.Recession in trade
4.Volatile global prices
5.Booming domestic economy

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6
Q

Why does a current deficit matter?

A

1.Loss of AD slower rates of gdp
2.Loss of jobs in home-based industries, structural unemployment
3.Weaker currency, higher inflation

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7
Q

Net secondary income

A

1.Overseas aids
2.Uk payments to the European Union

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8
Q

What is net primary income

A

1.Flow of profits, interest and dividends from investment in other countriesinto the UK

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9
Q

Example of trade balance in services

A

1.Banking, insurance, consultancy
2.Tourisim, transport, logistics
3.Shipping, education health
4.Research

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10
Q

What is a trade balance in goods?

A

1.Manufractured goods, components, raw materials, energy like oil or gas
2.Capital technology

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11
Q

What is a current account surplus

A

If’s positive, you import more money then you export

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12
Q

What is a current account deficit

A

A negative, you import less money then you export

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13
Q

What does the current account measure

A

1.Trade in goods
2.Trade in services
3.Nest primary income
4.Net secondary income

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14
Q

What is the balance of payments?

A

A record of all financial entering the country and leaving the country made up of the current account, capital account and financial account.

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