Balance of Payments

Question	Answer
What does the balance of payments do?	It records all financial transactions of a country with other countries. It records all flows of money into and out of a country
What are the three accounts of the BOP?	1. Current Account 2. Capital Account 3. Financial Account
Name the four sections of the Current Account	1. Trade in goods 2. Trade in services 3. Investment and Employment income (primary income) 4. Transfers (secondary income)
What occurs in the trade in goods section of the current account?	Trade in goods measures imports and exports of visible goods eg. pharmaceuticals and oil
What occurs in the trade in services section of the current account?	Trade in services measures the imports and exports of services such as tourism
What occurs in the investment and employment income section of the current account?	This covers the flow of money in and out of a country resulting from employment or earlier investment
What occurs in the transfers section of the current account?	Transfers are the movements of money between countries which aren't paying for goods or services and are not the result of investment eg. payments made to family members abroad
Give three causes of a current account deficit in a country	1. High levels of consumer spending 2. It's struggling to compete internationally 3. It has to deal with external shocks
Why might a country experience a current account surplus?	1.It has been experiencing a recession 2. The value of the currency is low 3. High interest rates

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	Created by Izzy Noone almost 7 years ago