The Macroeconomy – Balance of Payments

30 vocabulary flashcards covering key Balance of Payments concepts, components, and terminology.

Balance of Payments (BOP)

A systematic record of all monetary transactions between one country and the rest of the world during a specific period.

BOP Account

The set of statements that detail a nation’s international receipts (credits) and payments (debits).

Credit Item

A transaction bringing money into the country; recorded with a positive sign in the BOP.

Debit Item

A transaction sending money out of the country; recorded with a negative sign in the BOP.

Current Account

Section of the BOP that records trade in goods and services, primary income, and secondary income.

Trade in Goods

Exports and imports of physical, tangible products across borders.

Exports (Goods)

Domestic goods sold abroad, generating an inflow of money and counted as a credit.

Imports (Goods)

Foreign goods purchased by residents, creating an outflow of money and counted as a debit.

Balance of Trade in Goods

The value of goods exports minus goods imports for a given period.

Balance of Visible Trade

Another term for the balance of trade in goods; focuses on tangible products.

Merchandise Balance

Alternative name for the balance of trade in goods, highlighting tradable merchandise.

Surplus (Trade in Goods)

Condition where the value of exports of goods exceeds the value of imports (X > M).

Deficit (Trade in Goods)

Condition where the value of imports of goods exceeds the value of exports (X < M).

Trade in Services

Exports and imports of intangible services such as banking, insurance, and tourism.

Services Balance

Net value obtained by subtracting service imports from service exports.

Balance of Trade in Services

Synonym for services balance; tracks net service exports.

Balance of Goods and Services

Combined balance of trade in goods plus trade in services (items 1 + 2 of the current account).

Primary Income

Cross-border flows of factor earnings, including interest, profits, dividends, and wages.

Investment Income

Returns earned on foreign investments, such as interest, distributed profits, and dividends.

Wages (BOP Context)

Compensation received by residents working abroad or paid to foreign workers in the domestic economy.

Secondary Income

Current transfers of money that are not linked to goods or services transactions.

Current Transfers

One-way monetary flows like government grants, international organization contributions, and private remittances.

Government Transfers (BOP)

Public-sector payments or receipts such as foreign aid or contributions to international bodies.

Private Transfers (BOP)

Personal or corporate remittances and gifts sent across national borders.

Net Income Flows

Primary income receipts minus primary income payments in the current account.

Net Current Transfers

Secondary income inflows minus outflows during the period.

Current Account Balance

The overall result of combining balances on goods, services, primary income, and secondary income.

Receipts

All monetary inflows recorded in the BOP as credits.

Outflows

All monetary payments leaving the country, recorded as debits in the BOP.

Balance on Current Account

The final surplus or deficit after summing trade in goods, trade in services, income flows, and current transfers.