6.4 current account of the balance of payments at University of Birmingham

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Exemplary flashcards for 6.4 current account of the balance of payments at the University of Birmingham on StudySmarter:

problems with trade surplus (3)

Exemplary flashcards for 6.4 current account of the balance of payments at the University of Birmingham on StudySmarter:

ways a government can correct a trade deficit (4)

Exemplary flashcards for 6.4 current account of the balance of payments at the University of Birmingham on StudySmarter:

secondary incomes 

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primary incomes 

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trade in goods 

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trade in services 

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components of current accounts (4)

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Exemplary flashcards for 6.4 current account of the balance of payments at the University of Birmingham on StudySmarter:

balance of trade surplus 

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primary income components (2)

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current account surplus

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trade deficit 

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problems with a trade deficit (5)

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Exemplary flashcards for 6.4 current account of the balance of payments at the University of Birmingham on StudySmarter:

6.4 current account of the balance of payments

problems with trade surplus (3)

  • there may be political and economic pressure on the government from other countries to reduce its trade surplus so they can reduce their trade deficit 
  • exporting firms enjoy significant and rising overseas revenue from the sale of their exports, but the increase in income from exports may cause demand-push inflation when it is spent in the domestic economy 
  • demand for the national currency will exceed its supply and therefore the value of the currency will rise 

6.4 current account of the balance of payments

ways a government can correct a trade deficit (4)

  • floating exchange rate should correct it 
  • use contractionary fiscal policy 
  • raise interest rates 
  • introduce trade barriers 

6.4 current account of the balance of payments

secondary incomes 

secondary incomes are the current transfers between residents and non-residents 

6.4 current account of the balance of payments

primary incomes 

primary incomes are factor rewards exchanged between residents and non-residents for the use of other's factors of production 

6.4 current account of the balance of payments

trade in goods 

trade in goods involves the exchange of physical products between countries including natural resources and finished products 

6.4 current account of the balance of payments

trade in services 

trade in services are exports and imports of services that can't be seen or touched 

6.4 current account of the balance of payments

components of current accounts (4)

  • trade in goods 
  • trade in services 
  • primary incomes 
  • secondary incomes 

6.4 current account of the balance of payments

balance of trade surplus 

a balance of trade surplus means that a country's exports exceeds its imports 

6.4 current account of the balance of payments

primary income components (2)

  • current transfers received from non-residents 
  • current transfers to non-residents

6.4 current account of the balance of payments

current account surplus

current account surplus is when total credit exceeds total debts 

6.4 current account of the balance of payments

trade deficit 

a trade deficit is when the amount by which the cost of a country's imports exceeds the value of its exports 

6.4 current account of the balance of payments

problems with a trade deficit (5)

  • if more money is paid out to imports than is earned from the sale of exports then this loss of money from the economy means less is available for residents to spend on domestic goods and services 
  • domestic firms that experience a fall in demand for their products may cut batch production and reduce their demand for labour, resulting in higher unemployment 
  • the value of the exchange rate will fall as imports become more expensive to purchase 
  • imported inflation 
  • to pay for annual deficits, a country may need to borrow money from overseas. total debt will rise and more income will have to be used each year to pay interest charges 

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