Measuring balance Of Payments

Question 1

What are the four sections of the current account?

Answer 1

Trade in goods - visible imports or visible exports - e.g cars, food

Trade in service - Invisible imports or exports e.g Tourism, transport

International flows of income

Transfers of money from one person to another - e.g foreign aid of money to family abroad.

Question 2

Is the balance of payments always balanced?

Answer 2

No - if money flowing in exceeds money flowing out, it’s a surplus.

If money flowing out exceeds money in, it’s a deficit.

Question 3

What does the Balance Of payments record?

Answer 3

The flow of money in and out of a country - measured in value not volume