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14 Cards in this Set
- Front
- Back
- 3rd side (hint)
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The balance of payments |
A record of payments between one country and the rest of the world |
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Current account |
Records the trade in goods, services, investment income and current transfers |
4 elements |
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Trade in goods |
Measures the movement of tangible products across international borders |
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Trade in services |
Measures the movement of non physical output between countries |
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Investment income |
Returns of investment in other countries eg dividends |
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Current transfers |
Payment of money across borders that has no corresponding output eg aid or remittances |
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Current account surplus/defecit |
-value of inflows is greater than outflows and vice versa |
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Three parts of the balance of payments |
-current account -financial account -capital account |
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Financial account |
Record of money flows for investment purposes, eg FDI or saving in foreign banks |
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Capital account |
Transfer of assets and liabilities between countries |
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5 causes of a current account deficit |
-income levels at home (imports of consumer goods) -income levels abroad (impact level of exports) -exchange rate -structural problems/ low productivity -investment income, number of multinationals operating in country sending money home |
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Why is current account deficit a problem |
Fall in AD, all knock ons |
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Why could a current account deficit not be a problem |
-other components increasing -x is small % of AD -cyclical causes |
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4 causes of current account surpluses |
-weak currency -high productivity -low income at home -many multinationals send profits back to the country |
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