4.7.3 Balance of Payments

• The Balance of Payments consists of three main accounts
• The Current Account records trade in goods and services.


  True
• The Errors and Omissions account compensates for statistical errors
• What does the Current Account in the Balance of Payments record?

  Economic transactions
• Match the Current Account component with an example:

  Trade in Goods ↔️ Machinery exports

  Investment Income ↔️ Dividends from foreign stocks

  Current Transfers ↔️ Remittances
• Order the three main accounts of the Balance of Payments by their increasing focus on financial flows:

  1️⃣ Current Account

  2️⃣ Capital Account

  3️⃣ Financial Account
• Which Balance of Payments account records unilateral payments like foreign aid?

  Current Account
• The Financial Account covers direct investment, portfolio investment, and other investments
• What does the Current Account measure in the Balance of Payments?

  Economic transactions with the world
• The Current Account provides a measure of a country's trade balance and net income from foreign investments and transfers.


  True
• What does the Capital Account track in the Balance of Payments?

  Capital transfers and non-produced assets
• The Capital Account records changes in ownership of non-produced, non-financial assets.
• What are the causes of a Balance of Payments surplus?

  Exports exceeding imports
• Arrange the Balance of Payments accounts in their correct order.

  1️⃣ Current Account

  2️⃣ Capital Account

  3️⃣ Financial Account
• What are the three main accounts of the Balance of Payments (BoP)?

  Current, Capital, Financial
• What types of investments are covered by the Financial Account?

  Direct, portfolio, other
• Match the Balance of Payments account with its description:

  Current Account ↔️ Trade in goods and services, investment income, current transfers

  Capital Account ↔️ Capital transfers, non-produced assets

  Financial Account ↔️ Direct investment, portfolio investment, other investments
• What is the Balance of Payments (BoP)?

  Record of economic transactions
• Match the Balance of Payments account with its description:

  Current Account ↔️ Records trade in goods and services

  Capital Account ↔️ Tracks capital transfers

  Financial Account ↔️ Covers direct and portfolio investment
• What is included in the Capital Account of the Balance of Payments?

  Debt forgiveness
• Order the three main accounts of the Balance of Payments by their primary focus:

  1️⃣ Current Account

  2️⃣ Capital Account

  3️⃣ Financial Account
• Foreign aid is an example of a current transfer
• What is the purpose of the Errors and Omissions account in the Balance of Payments?

  Compensate for statistical errors
• The Current Account includes trade in both goods and services.

  True
• What does the Capital Account track in the Balance of Payments?

  Capital transfers and non-produced assets
• The Current Account includes trade in goods and services, investment income, and current transfers.


  True
• Match the Current Account component with its example:

  Trade in Goods and Services ↔️ Machinery exports

  Investment Income ↔️ Interest from overseas bonds

  Current Transfers ↔️ Foreign aid
• The Capital Account and Financial Account are two main components of the Balance of Payments alongside the Current Account.
• Direct investment, such as buying a foreign company, is recorded in the Financial Account.


  True
• The Balance of Payments is in equilibrium when total receipts equal total payments.


  True
• The Balance of Payments consists of three main accounts: Current Account, Capital Account, and Financial Account.
• Which Balance of Payments account includes exports and imports of goods and services?

  Current Account
• The Current Account records trade in goods and services, investment income, and current transfers
• The Capital Account tracks debt forgiveness and patents.


  True
• The Current Account records economic transactions for goods, services, investment income, and current transfers
• Investment income includes interest, dividends, and profits from abroad.


  True
• What does the Capital Account track primarily?

  Capital transfers, non-produced assets
• What is the condition for the Balance of Payments to be in equilibrium?

  Total receipts equal total payments
• A BoP deficit can lead to a depreciation of the national currency
• Higher inflation in a country can worsen its trade balance.


  True