4.1.7 Balance of payments

Cards (24)

  • The balance of payments (BOP) is a record of all economic transactions between the residents of a country and the rest of the world over a specific period, typically a year
  • The balance of payments must balance overall.
  • Match the BOP account with its description:
    Current Account ↔️ Includes trade in goods and services
    Capital Account ↔️ Records debt forgiveness
    Financial Account ↔️ Covers foreign direct investment
  • What does the current account represent in the balance of payments?
    Flow of goods, services, income
  • The trade balance is the difference between exports and imports of goods
  • Net current transfers include remittances and foreign aid.
  • Order the components of the current account:
    1️⃣ Trade in Goods
    2️⃣ Trade in Services
    3️⃣ Investment Income
    4️⃣ Net Current Transfers
  • What is the impact of a significant current account surplus or deficit on a country's economy?
    Economic stability and exchange rate
  • The capital and financial accounts record the transfer of capital and financial assets.
  • Match the account with its key elements:
    Capital Account ↔️ Debt forgiveness
    Financial Account ↔️ Foreign direct investment
  • FDI involves long-term control and physical assets
  • Portfolio investments focus on short-term gains in financial assets.
  • What is the mathematical representation of balance of payments equilibrium?
    Current \; Account + Capital \; Account + Financial \; Account = 0</latex>
  • The balance of payments must balance overall.
  • The current account includes the trade balance, net income, and current transfers
  • The balance of payments (BOP) is a record of all economic transactions between a country's residents and the rest of the world over a specific period.
  • Match the components of the BOP with their descriptions:
    Current Account ↔️ Trade in goods and services
    Capital Account ↔️ Records debt forgiveness
    Financial Account ↔️ Tracks foreign direct investment
  • The BOP must balance overall, meaning any current account deficit is offset by surpluses in the capital and financial accounts
  • A trade balance surplus occurs when exports exceed imports of goods.
  • Match the components of the current account with examples:
    Trade in Goods ↔️ Japan exporting cars to the U.S.
    Trade in Services ↔️ Tourism revenue from international visitors
    Investment Income ↔️ Dividends from stocks in overseas companies
    Net Current Transfers ↔️ Remittances sent by workers abroad
  • A significant current account surplus or deficit can impact a country's economic stability and exchange rate
  • In the balance of payments, a deficit occurs when total outflows exceed total inflows
  • A surplus in the balance of payments can lead to inflation.
  • Exchange rate devaluation lowers the value of a country's currency