2.3.4 The balance of payments on current account 2016

Balance of Payments

A record of a country's trade and transactions with the rest of the world.

Current Account

Comprises trade in goods, trade in services, income flows, and transfers.

Surplus

When the sum of exports is greater than the sum of imports.

Deficit

When the sum of exports is less than the sum of imports.

Exports

Goods or services sold by a country to foreign countries.

Imports

Goods or services purchased by a country from foreign countries.

Trade in Goods

Measures net exports of visible goods.

Trade in Services

Measures net exports of invisible items like banking and tourism.

Investment Income

Profits and dividends from UK-owned assets abroad.

Transfers

Payments made by or received from other countries, such as foreign aid.

Factors Influencing Current Account Balance

Includes productivity, inflation, exchange rates, and economic activity.

Tertiary Sector

Economic sector focused on services rather than goods.

Consumer Choice

The opportunity for consumers to select from a variety of imported goods.

Economic Growth

Increase in the amount of goods and services produced per head of the population over time.

Macroeconomic Performance

Refers to the overall state of the economy based on objectives like growth, unemployment, and inflation.

Currency Appreciation

When the value of a country's currency rises relative to other currencies.

Currency Depreciation

When the value of a country's currency falls relative to other currencies.

Capital Account

Records the flow of capital in and out of a country, including investments and loans.

Financial Account

Tracks transactions that involve financial assets, such as stocks and bonds.

Balance of Trade

The difference between a country's exports and imports of goods and services.

Fiscal Policy

Government adjustments to spending and taxation to influence the economy.

Monetary Policy

Central bank actions that shape the economy by controlling the money supply and interest rates.

Exchange Rate

The value of one currency for the purpose of conversion to another.

Trade Deficit

Occurs when a country's imports exceed its exports, resulting in negative trade balance.

Trade Surplus

Occurs when a country's exports exceed its imports, resulting in positive trade balance.

Net Exports

The value of a country's total exports minus its total imports.

Bilateral Trade Agreement

A trade agreement between two countries to promote trade and investment.

Multilateral Trade Agreement

An agreement involving more than two countries aimed at reducing trade barriers.

Protectionism

Economic policy of restraining trade between nations through tariffs, quotas, and other regulations.

Tariff

A tax imposed on imported goods to raise their price and protect domestic industries.

Quotas

Limits on the quantity of a specific good that can be imported into a country.

Trade Liberalization

The removal or reduction of trade barriers to encourage free trade.