Balance of payments (Economic performance 4)

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8 Terms

1
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What is the balance of payments?

  • A record of a country’s transactions with the rest of the world

  • It consists of the current account, financial account and capital account

2
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What is the current account?

  • Measures trade in goods(visible)

  • Measures the trade in services (invisible)

  • This makes up the trade balance

  • Measures income flows (primary income)- wages, investment and income

  • Measures transfers (secondary income)- remittances, foreign aid and gov transfers to the EU

(records all international trade)

3
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Current account deficit

Currency outflow exceeds currency inflow

4
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Current account surplus

Currency inflow exceeds currency outflow

5
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Balance of trade in goods

Part of the current account measuring payments for exports and imports of goods.

6
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Balance of trade in services

The part of the current account measuring payments of the exports and imports of services

7
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Hot money

  • Short term monetary flows

  • Capital that moves quickly and frequently between financial markets in search for the highest short term return

8
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What does a current account deficit suggest?