The Balance of Payments

Define the Balance of Payments

The Balance of payments measures what 5 main things ?

The Balance of Payments is split into what 3 accounts ?

The current account measures what 4 main things ?

The capital account measures what ?

The financial account measures trade in ...

What are imports ?

Imports represent a ... on the balance of payments account

Why might imports be purchased ?

What are exports ?

Exports represent a ..... on the balance of payments accounts

The level of exports may be dependent on the ...... of UK producers in comparison to those abroad

Trade not only occurs in goods and services but ...... and ...... are also recorded as a result of .........

Give 4 examples of financial transactions as trade

Services are sometimes referred to as ...

The purchase and sale of services is an ......... component of UK trade

What are the main 10 categories of trade in services ?

What are reserve assets ?

The UK trading position is heavily reliant on the changing nature of ..... across the globe

The changing nature of competitiveness across the globe has an impact on UK trade in terms of what 3 things ?

What are the main factors influencing international competitiveness ?
3 marks

All the factors influencing international competitiveness affect the .... .... of production

Define capital flows

With exports, overseas residents .... ..... in order to finance the purchase of UK exports

With exports - Currency flows .... the UK in payment for goods and services flowing ...

Imports: Residents ... pounds and ... foreign currencies to finance the purchase of goods and services produced by other countries

The balance of trade in goods shows the extent to which the value of ..... of goods exceeds the value of ...... and visa versa.

A + shows a ..... item flowing .... UK

A - shows a .... item flowing ..... UK

The UK has a significant balance of payments deficit in ...... goods, reflecting a loss of .......

Define investment income

UK residents depositing money in offshore bank accounts is an example of what ?

Interest payments from money deposited in offshore bank accounts is an example of what ?

Define net investment income

Transfers: Give 3 examples of outward flows

The decline of manufacturing and the growth of service industries mean that the UK now has a ........ and ........ economy

What is one of the largest export industries in the UK ?

What highlighted the need for a more resilient and sustainable financial services industry to support the economy ?

The financial services sector provides essential .... and financial services to businesses and households

During the period after 2000, the expansion of the financial services was a significant influence on the ...... of the economy overall

Recent growth of the financial services sector was reversed in the recession, reducing GDP permanently by about ....

Due the recession, the country has suffered a further loss of income as a result of the losses banks have made, with a total fall in real national income of .... and government revenue reduced by ..... of GDP

Services such as retailing, education and provision of healthcare are produced and consumed in the ......

Many services previously produced within the UK are now being ...... which is an important part of the ...... process

Many UK companies which used to produce services 'in-house' now ........ or buy the services from outside suppliers, located in countries with ........

UK-based companies are locating 'back office' , what does this mean ?

The UK is still a significant net exporter of what 3 things ?
This illustrates the UK's ........ in service sector industries

What is equilibrium of the balance of payments ?

What is BOP disequilibrium ?

Why do the estimates of the items in the BOP never sum to 0 ?

Outline the main problems of a current account deficit
(3 marks)

What are the main positives of a current account deficit ?

Main problems with a current account surplus ?

Export-led growth is crucial for ...... from recession to lead into ...... growth

What is the effect of new middle classes in emerging countries on exports/imports

According to CBI, industries with high export growth potential could significantly increase our ....

UK goods becoming quality competitive may only be achieved in the ..... term, helped by appropriate ...... policies implemented by the ...... and supply-side reforms in the ....... sector

An increase in exports is a net ...... of ..... the circular flow of income

An increase in exports shifts the AD curve

An increase in exports, ceteris paribus, causes RNO to ....., causing a fall in ....... when the economy is in a recession

On a Keynes AD/AS diagram, further shifts in AD outwards due to an increase in exports eventually becomes ....

When the economy is producing on the verticle LRAS curve, any further increase in demand for exports will lead to the price level ...... without any substantial increase in ....

HOWEVER, foreign demand for a country's exports may be in response to favorable ...... conditions in the ....... currency which shifts the ....... outwards

What is export led growth ?

A fall in export demand or an increase in domestic demand for imports is a net ...... of demand from the circular flow of income, AD shifts
..... occurs and real national output

What 3 policies can be used to reduce a BOP current account deficit ?

Explain how spending on education and training can reduce the deficit
What is the main aim ?

Demand-side policies: What are expenditure switching policies and how are these used to reduce the deficit ?

What are expenditure reducing policies and how are they used to reduce the deficit ?

UK's current account deficit in 2013 ?

Financial account net inflow in 2013 compared with 2012

Q1 2008 Current account deficit
Q3 2014 current account deficit