2.3.1 Balance of Payments **NOT FINISHED

Components of Balance of Payments

• Current Account

  • Goods (Visibles)

  • Services (Invisibles)

  • Primary income

  • Secondary account

• Capital & Financial account

Goods

Visibles

Records trade of:

• Raw materials, semi-manufactured goods or finished goods

Services

Invisibles

Records trade of:

• financial services, transport, tourism, and entertainment

Primary income

Income generated from actual production of goods and services and ownership of assets, wages and cross boarder investments

Secondary income (Current transfers)

Payment of an economic value that does not directly provide an item of economic value in return

• One-way transaction, no goods or services in return

• remittances, grants etc.

Deficit

When country’s import is greater than exports

• more money flowing out of country

• spending > income

Surplus

When a country’s exports are greater than imports

• more money flowing in out country

• income > spending