Understanding the UK Balance of Payments and Trade Deficits

The video lecture explores the balance of payments, focusing on the UK's experience. It covers the current and financial accounts, trade deficits, and the historical context of the UK's economic activities. The lecture discusses the implications of running a current account deficit, highlighting both benefits and potential risks. It also evaluates the sustainability of the UK's deficit by examining it as a percentage of GDP. The lecture concludes with a discussion on key terms and the importance of understanding the balance of payments as an accounting exercise.

What are trade deficits and how do they affect the current account?

Explain the difference between the current account and the financial account.

What is the balance of payments and what does it measure?

What does a surplus in the financial account indicate about a country's economic situation?

Reflect on the UK's trade experience since the mid-1980s and its implications for the balance of payments.

Discuss the significance of the 'Big Bang' regulatory event in the context of the UK's balance of payments.

What are the potential benefits of running a current account deficit?

How does inward investment impact the UK's current account deficit?

How can the current account deficit be expressed as a percentage of GDP, and why is this important?

In what ways can a current account deficit be sustainable for an economy?