Balance of Payments AS Flashcards
What is the Balance of Payments
A record of all financial transactions made between, consumers, businesses and the government in one country with other nations
What are inflows of foreign currency on the BOP
Positive Entry
What are outflows of foreign currency on the BOP
Negative Entry
What is the main measure of a country’s external trade performance
The current account of the balance of payments
What is the current account
The difference between money and credit going in and out of an economy
What is the current account deficit
There is a net outflow of income from the economy’s circular flow
What are debtor countries
Current Account Deficit Nations
What is the current account surplus
Country is operating an external surplus
There is a net inflow of income into the economy
What are creditor nations
Current Account Surplus Nations
Causes of a current account deficit
Poor Price and Non Price Competitiveness
Strong Exchange Rate affecting X + M
Recession in one or more major trade countries
Volatile global prices
Booming domestic economy
Causes of a current account deficit
Poor Price and Non Price Competitiveness
Strong Exchange Rate affecting X + M
Recession in one or more major trade countries
Volatile global prices
Booming domestic economy
When does the current account tend to increase for the UK
In recession as AD falls and demand for imports falls
Mistakes to avoid with current account
Government does not pay the current account deficit
Government borrowing is the same as the current account deficit
