6.3 Balance of Payments

Imports

goods/services bought & brought into a country

Exports

goods/services made in a country & sold to another

Balance of trade
> f__ of $$ i_ & o__ of a country
> BoT = v__ __ value - v__ __ value

flows, in, out, visible export, visible import

Visible trade

trade w/ tangible goods

Invisible trade: intl trade in s__ e.g. insurance, banking
> balance of services = i__ __ value - i__ __ value

services, invisible export, invisible import

Trade deficit is when

country spends more on imports than export earnings

Trade surplus is when

country earns more from exports than it spent on imports

Balance of payments (BoP)
> f__ r__ of country’s t__ w/ r__ of the w__ for a given t__ period (1yr)
> incl country’s t__ in goods/services w/ other c__
> in theory, BoP always b__ over time (country can only s__ what it earns)
> split into 3 main accts: cu__, ca__, f__

financial record, transactions, rest, world, time, trade, countries, balances, spend, current, capital, financial

Current Acct
> records amt country p__ o__ vs amt r__ by f__ countries
> surplus = __ bal
> deficit = __ bal
Financed by b__ from abroad = bad
Financed by e__ i__ (shares) = no d__ to repay = good

pays overseas, received, foreign, CR, DR, borrowing, equity investment, debt

Current acct:
Depends on d__ size: <5% of GDP is ok
> f__ can take c__ of a large amt of country’s a__
>> BUT for. i__ can = j__, new t__, incr. e__ g__
> could mean c__ (i__) > investment
>> BUT leads to incr. l__ s__
> l__ current acct deficit = currency d__
>> BUT leads to incr. country’s e__ = balances d__
> can be caused by i__ economy (exports not comp.)
>> BUT large foreign investment = p__, comp. economy

deficit, foreigners, control, assets, investment, jobs, tech, economic growth, consumption, imports, living standards, large, depreciation, exports, deficit, inefficient, productive

Current acct has:
1. b__ o_ g__
> v__ trade bal; diff. between value of i__/exports of p__ goods
2. b__ o_ s__
> i__ trade bal; diff. between value of i__/exports of s__

balance on goods, visible, imports, productive, balance on services, invisible, imports, services

Current acct has:
3. b__ o_ p__ i__
> e__ on i__/e__
> incl income f__ in/out of country e.g. int. on s__, dividends
4. b__ o_ s__ i__ (c__ transfers)
> _-way transfers of $$ (n__ received in return)
e.g. f__ aid, r__, gifts sent across borders

balance on primary income, earnings, investment, employment, flow, savings, balance on secondary income, current, 1, nothing, foreign, remittances

Capital acct
> records t__ of o__ of f__ a__

transfer, ownership, fixed assets

Financial acct
> records all t__ for f__ investment

transactions, financial