Balance of Payments Accounts

Flashcards covering key concepts related to the Balance of Payments Accounts, including definitions and explanations of current and capital accounts.

Current Account (CA)

Records net income from abroad, including interest and dividend payments.

Capital and Financial Account (CFA)

Records financial capital flows including investments, which balance the current account.

Balance of Payments

The sum of a country's current account and capital and financial account, which must equal zero.

Debit in Balance of Payments

An entry that indicates money flowing out of a country, such as a U.S. citizen purchasing a foreign car.

Surplus in Capital and Financial Account

Occurs when a country has a current account deficit, balancing the overall balance of payments.

Current Account Deficit

A situation where a country's imports of goods, services, and transfers exceed its exports.

What is a trade deficit?

A trade deficit occurs when a country's imports exceed its exports.

What is a trade surplus?

A trade surplus happens when a country's exports exceed its imports.

What does net income from abroad include?

Net income from abroad includes earnings from investments and wages paid to residents living abroad.

What are the components of the Balance of Payments?

The Balance of Payments is composed of the current account and the capital and financial account.

How does currency depreciation affect imports and exports?

Currency depreciation makes exports cheaper and imports more expensive