BoP

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13 Terms

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Balance of Payments (BoP)

A comprehensive record of all economic transactions between the residents of a country and the rest of the world over a specific period, usually a year.

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Current Account

A part of the BoP that records the trade in goods and services, income, and current transfers.

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Trade in Goods

The export and import of tangible products. A surplus occurs when exports exceed imports, and a deficit occurs when imports exceed exports.

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Trade in Services

The export and import of intangible services such as banking, insurance, and tourism.

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Primary Income

Earnings on investments abroad (such as dividends, interest, and profits) minus payments made to foreign investors.

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Secondary Income (Current Transfers)

Transfers of money where no goods or services are exchanged, such as foreign aid, remittances, and gifts.

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Capital Account

A part of the BoP that records capital transfers and the acquisition/disposal of non-produced, non-financial assets.

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Capital Transfers

Transfers involving the transfer of ownership of fixed assets or the forgiveness of debts.

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Financial Account

A part of the BoP that records transactions involving financial assets and liabilities, including direct investment, portfolio investment, and other investments.

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Direct Investment

Investments in physical assets abroad, such as purchasing real estate or establishing businesses.

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Current Account Surplus

Occurs when a country’s total exports of goods, services, and transfers exceed its total imports.

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Current Account Deficit

Occurs when a country’s total imports of goods, services, and transfers exceed its total exports.

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Trade Barriers

Government-imposed restraints on the flow of international goods or services, such as tariffs, quotas, and subsidies.