SUMMARY

SUMMARY

1. CURRENT ACCOUNT & EXCHANGE RATE

   • A deficit in the current account of the balance of payments may result downward pressure on the exchange rate
     • Foreign demand increases but supply currency weakens
     • Same as the other example but viceversa

2. BALANCE OF PAYMENTS

   • Any transaction that leads to money entering is called credit item (it has a positive value)
   • Any transaction that leads to money leavingis called debit item (it has a negative value) tourism
   • A record of the value of all transactions between the residents of a country and the world in a period of time

3. CURRENT ACCOUNT

   • Balance of trade in goods = export of goods - import
   • Balance of trade in services = export services - imports
   • Current account - capital account + financial account + errors
   • Transfers without any good (donations) = transfers recived - paid
   • IF IT IS POSITIVE, THE MONEY IS FLOWING

4. CAPITAL AND FINANCIAL ACCOUNTS

   • CAPITAL
     • Capital transfers (monetary movements of capital goods)
     • Transactions in non-produced, non-financial, intangible assets
   • FINANCIAL
     • Direct investment (investment in physical capital)
     • Portfolio investment (Stocks, shares, government bonds)
     • Reserve assets (official resserves held by the government)