Ch27 Balance of Payments

Front

What is the balance of payments?

Back

A record of a country’s economic transactions with the rest of the world over one year.

Front

What are the main components of the balance of payments?

Back

Current account, capital account, financial account, net errors and omissions.

Front

What are the four parts of the current account?

Back

1. Trade in goods – exports and imports of goods [visibles]. 2. Trade in services – exports and imports of services [invisibles]. 3. Primary income – profits, interest and dividends earned on direct investment abroad and foreign earnings on investment in the country; includes workers’ remittances. 4. Secondary income – payments made and receipts received for which there is no exchange of an actual good or service.

Front

What is the balance of trade in goods and services?

Back

The difference in the value of exports and imports of goods and services.

Front

How is the current account balance calculated?

Back

The balance of trade in goods and services plus net investment income from overseas assets and net transfers.

Front

When is there a balance in the current account of the balance of payments?

Back

When total payments are about the same as total receipts.

Front

What indicates an imbalance in the current account?

Back

A clear deficit or surplus between total payments and total receipts, likely requiring some form of government response.