Definitions
This records financial transactions made between consumers, businesses and the government in one country with others. (Hint: It must = 0)
What is the Balance of Payments?
Current Account, Capital Account, Financial Account
What are the three components of the Balance of Payments?
When exports exceed imports.
What is a Balance of Trade Surplus?
Transfers of money where nothing is received in return.
What are current transfers?
Capital Transfers, Non-Financial Asset Transfers
What are the elements of the Capital Account?
A condition generally seen as undesirable and a sign of economic weakness.
What a Current Account Deficit?
Foreign currencies purchased to be used by the central bank in its monetary policy.
What are Reserve Assets?
Balance in the Trade of Goods, Balance in the Trade of Services, Income Transfers, Current Transfers
What are the elements of the Current Account?
A condition generally seen as undesirable and a sign of economic strength.
What is a current account surplus?
Exports in goods which leave the country (sold to foreigners) result in an inward flow of money and are recorded with a positive (+) sign on the balance of payments account.
What are Visible Exports?
Direct Investment, Portfolio Investment, Reserve Assets
What are the elements of the Financial Account?
Exporting less than is imported (X<M)
What is a Trade Deficit?
Imports of services are services where money flows a broad. Hence they are called debits on the balance of payments current account.
What are invisible imports?
Debt Forgiveness, Non-Life Insurance Claims and Investment Grants are found in this section of the Balance of Payments.
What is the Capital Account?
Exporting more than is imported (X>M)
What is a Trade Surplus?