WEEK 16 Flashcards
(30 cards)
balance of payements record all monetary flows between residents and the rest of the world
credits inflow - money received from abroad credit or positive side
credits outflows - money sent abroad debit or negative side
3 components
current account, capital account and financial account
EXPORTS IS
CREDITS
IMPORTS
DEBITS
TRADE DEFICIT
LEAKAGES FROM CIRCULAR FLOW(REDUCED DEMAND) VS
TRADE SURPLUSES
INJECTIONS(INCREASED DEMAND)
SURPLUS =
CREDITS>DEBITS
DEFICIT
DEBITS>CREDITS
CAPITAL ACCOUNT
records flows related to fixed assets like land trademarks
migrant transfers
government debt forgiveness
usually small compared to the other accounts
financial account
record of any buying or selling of asset usually involve investment
direct investment
long term interest in foreign businesses
portfolio investment
buying shares/debt without control
other financial flows
short term monetary movements banks deposits loans
driven by interest rate differences and exchange rate expectations
reserves
selling reserves to buy sterling = credit
building reserves = debit
net recording
only net changes are recorded
OVERALL Bop must balance if not
xchanghe ratres adjust or govermnet intervenes
error and omission to account for any
mistakes we do when we collect data
-statisticall discrepancies are inevitable
a net errors anmd omissions item is included to ensure BoP balances causes
data from multiple sources
reporting delays or missing data
any deficit in one component needs to be compensated in a
surplus in the other
when we have a deficit the import is going to be
greater than the export
exchange rate is
how much currency u will recieve if u exchange with another currency
if there is a current account deficit of 1bn then
the overall capital plus financial accounting (including net errors and omissions) must be in surplus by 1bn
the exchange rate is used
by individuas for travle, trade and investment
