Balance of Payments Flashcards
1
Q
what does the balance of payments represent?
A
net amount of international trade (X-M)
2
Q
what is it called when we import more than we export?
A
trade deficit
3
Q
what is it called when we export more than we import?
A
trade surplus
4
Q
why is a deficit be a bad thing?
A
shrinks the economy, more dependent
5
Q
what is the effect of balance of payments on the pound?
A
- Weak exports mean lower demand for £. High imports mean people frequently exchanging £ to € and thus currency depreciates.
