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Flashcards in Y1 - BoP Deck (10)
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1
Q

Define BoP

A

A record of payments between one country and the rest of the world
- Made up of current, financial and capital account

2
Q

Define Current account

A

A record of trade in goods, trade in services, investment income and current transfers

3
Q

Define trade in goods/services

A

CURRENT ACCOUNT

- The movement of tangible products/output across international borders

4
Q

Define investment income

A

CURRENT ACCOUNT

- The reward for investment in other countries = profits, interests and dividends

5
Q

Define current transfers

A

CURRENT ACCOUNT

- The payment of money across international borders that has no corresponding output (eg taxes to EU)

6
Q

Define current account surplus

A

inflows > outflows (e.g. Germany)

7
Q

Define current account deficit

A

Inflows < outflows (e.g. UK/USA)

8
Q

Define financial account

A

The record of money flows for investment purposes (FDI and hot money flows)

9
Q

Define capital account

A

The record of changes in net assets in each country ( as well as errors and emissions) = puts other accounts into balance

10
Q

Current account imbalances

A
  • Not a problem if can be funded = can be a sign of living standards rising (investment)
  • If cannot afford = currency value down = inflation, less competitive = unemployment in domestic economy
  • Higher taxes and less government spending helps fix but can reduce growth in long run