Balance of payments Flashcards
Why is booming domestic economy bad?
1.Domestic producers need to import raw materials from abroad
2.More imports
3.Increases in prices
Why is a volatile global prices bad?
Exprorts of primary commodities might be hit by a fall in global prices
Why is a strong exchange rate bad?
1.High currency value means prices of exports increase so you sell less
2.Imports cheaper, don’t buy from uk
Why is poor price and non price competitiveness an issue?
1.Higher inflation
2.low levels of capital investment
3.Low labour productivity
5 causes of a current account deficit
1.Poor price and non-price competitiveness
2.Strong exchange rate
3.Recession in trade
4.Volatile global prices
5.Booming domestic economy
Why does a current deficit matter?
1.Loss of AD slower rates of gdp
2.Loss of jobs in home-based industries, structural unemployment
3.Weaker currency, higher inflation
Net secondary income
1.Overseas aids
2.Uk payments to the European Union
What is net primary income
1.Flow of profits, interest and dividends from investment in other countriesinto the UK
Example of trade balance in services
1.Banking, insurance, consultancy
2.Tourisim, transport, logistics
3.Shipping, education health
4.Research
What is a trade balance in goods?
1.Manufractured goods, components, raw materials, energy like oil or gas
2.Capital technology
What is a current account surplus
If’s positive, you import more money then you export
What is a current account deficit
A negative, you import less money then you export
What does the current account measure
1.Trade in goods
2.Trade in services
3.Nest primary income
4.Net secondary income
What is the balance of payments?
A record of all financial entering the country and leaving the country made up of the current account, capital account and financial account.
