balance of payments Flashcards
(30 cards)
How is Australia linked to the global economy
through the flow of goods and services, the flow of financial and capital and the flow of people including tourists, students, workers and immigrants.
What percentage of Australias GDP is attribute to exports and imports
Exports and imports each represent around 22 percent of Australians GDP.
Explain how consumers and producers benefit from the global economy
consumers benefit from the global economy by being able to consume a much wider variety of goods and services..
Producers benefit bc they can sell their output to a greater number of buyers.
Why has china become Australia’s main trading partner
China has a very high demand for resources such as minerals and fuels.
China and Australia tend to trade highly as they both demand things from each other.
how does a trade deficit occur
a trade deficit occurs when the total value of imports exceeds the total value of exports. X < M
how does a trade surplus occur
A trade surplus occurs when the total number of exports exceeds the total value of imports. X > M
what is the balance of payment (BOP)
summary of all the external transactions between Australia and the rest of the world.it measures trades in goods, services, incomes, savings and investment.
what is the current account
records all the flows of goods, services and income payments which are the result of productive activity in the current financial year.
Benefits from trade
exports have benefits for businesses - higher production and income.
imports have benefits for consumers - higher consumption and standard of living
capital and financial account
record of all funds flowing into and out of Australia
- capital account is the smaller off the two, records the non produced, non financial assets, migrant assets
- the finical account is the more important of the two, financial asset and liabilities, shares, securities, loans, ect.
Australia’s major exports
- coal
- iron ore
- natural gas
Australia’s major imports
- Personal travel
- refined petroleum
- passenger and motor vehicles
Why did Australia get a record surplus in 2019
when commodity prices increase, our trade balance also increases bc the value of our exports rises relative too imports. this occurred from 2015 causing Australia’s trade balance to swing from a large deficit to record a surplus in 2019.
what are commodity prices
the prices we receive for out commodity exports such as iron and coal
when commodity prices increases because the value of our exports rises relative to imports
top 3 Australia trading partners
China, Japan, USA
Why does Australia normally record a trade deficit
The balance on current account is equal and opposite in value to the balance on the capital and financial account plus the net errors and omission items. Australia traditionally records a deficit in the current account matched by a surplus in the capital and financial account.
3 reasons why australis trade balance fluctuates
- Australia’s exports are determined by other countries demand for our goods and services - if the Chinese and Japanese economies experience strong economic growth then our resource exports to these countries will increase.
- Australia’s imports are determines by our own domestic growth - strong economic growth in Australia will increase spending not only on consumer imports but also in intermediate and capital goods imports.
- The prices we receive for our commodity exports such s iron and coal - when commodity prices increase, our trade balance also increases because the value of our exports rises relative to imports.
what is credit
exports of goods and services, income receivable, increase in foreign liability, export of currency.
what is debit
imports of goods and services, income payable, increase in foreign assets, import of currency .
Why does the balance of payments must always balance
Since for each transaction there is a matching credit and debit entry, the overall balance of payments must always balance. This means that the sum of all credit entries will be exactly offset by the sum of all debit entries.
What types of transactions are recorded in the current account
goods, services and income
Which is the largest category of investment income
Foreign investment income
what is primary income
refers to income earned by Australian residents from non residents (credits) and income paid to overseas residents (debits)
what are the two categories of primary income
- compensation of employees (for the use of labour)
- investment income (for the use of capital)
