3.2 balance of trade

Question 1

balance of payments

Answer 1

the balance of payments (BOP) of a country is a record of its international transactions with the rest of the world over a period of time, usually a year

Question 2

current account

Answer 2

the current account records payments for exports and imports of goods and services, income flows, and current transfers into and out of the country in a year

Question 3

primary income flows

Answer 3

primary income flows include income payments in the form of wages, rent, interest, profits and dividends flow into and out of the country

Question 4

secondary income flows

Answer 4

secondary income flows include government and private transfers that do not involve the exchange of any goods, services or financial assets

Question 5

balance of trade

Answer 5

the balance of trade records the inflow and outflow of the local currency arising from international trade in goods and services

Question 6

capital and financial account

Answer 6

the capital and financial account records a country’s transactions in both physical and financial assets with the rets of the world

Question 7

short-term capital flows (hot-money)

Answer 7

transactions in financial assets such as stocks and bonds

Question 8

long-term capital flows (FDI)

Answer 8

international sales and purchases of illiquid physical assets such as land, buildings and factories are classified as long-term capital flows because such assets are not easily exchanged for cash

Question 9

balance of trade deficit

Answer 9

a BOT deficit occurs when the value of a country’s imports (import expenditure) exceeds the value of its exports (export revenue)

Question 10

balance of trade surplus

Answer 10

a BOT surplus occurs when the value of a country’s exports (export revenue) exceeds the value of its imports (import expenditure)