Econ 6.1-6.3

What is the balance of payments made up of?

Capital (current) account & Capital and Financial Account

What is CA made of?

Net Exports

Money Transfers

Goods/Services

Investment Income

Net transfers

What is investment income?

It is the income earned for investments that were purchased in other countries

What is CFA made up of?

Balance of payments for assets between countries and financial capital transfers

Examples of CA transactions?

What is trade balance?

Net exports (e-i)

Which is import and which is export?

Export: Credit (SELLING —> MONEY IN)

Import: Debit (BUYING —> MONEY OUT)

When is there a trade deficit ??

Imports > Exports

**trade deficit doesn’t always mean a deficit in the ca**

What is apart of CFA account??

How do you calculate current account?

(Exports-Imports) + (Money received from abroad - Money paid abroad) + (Transfers recieved - Transfers sent)

Basically just calculate the differences - so same for CFA

Currency Appreciates

One currency becomes more valuable relative to the other currency

Before, he went to the store and got 2 reales in exchange for his dollar. Afterwards, he went to the store again and got 5 reales for that same 1

The dollar has more purchasing power now

Currency Depreciation

When a currency becomes less valuable relative to the other country