4.7.3 Balance of Payments

    Cards (45)

    • What is the Balance of Payments (BoP)?
      Summary of economic transactions
    • What does the Capital Account cover in the Balance of Payments?
      Transfers of capital ownership
    • A balancing item is added to the Balance of Payments to ensure total credits equal total debits.

      True
    • What does the Current Account reflect in the Balance of Payments?
      Trade balance and net income
    • Order the components of the Current Account:
      1️⃣ Trade Balance
      2️⃣ Income Balance
      3️⃣ Current Transfers
    • What does the Income Balance in the Current Account measure?
      Net income from abroad
    • The Trade Balance reflects a country's competitiveness in international markets.

      True
    • What is added to the Balance of Payments to ensure that total credits equal total debits?
      Balancing item
    • Match the Balance of Payments account with its contents:
      Current Account ↔️ Records trade in goods, services, income, and current transfers
      Capital Account ↔️ Covers transfers of capital ownership
      Financial Account ↔️ Includes investments by residents abroad and foreigners
    • What does the Trade Balance measure in the Current Account?
      Exports minus imports
    • Current transfers in the Current Account include foreign aid and remittances.

      True
    • Cross-border investments in stocks and bonds, where the investor does not have a controlling stake, are classified as Portfolio Investment
    • A Current Account surplus tends to appreciate a country's currency.

      True
    • A Current Account deficit can lead to currency depreciation
    • The Current Account affects a country's trade balance and competitiveness.
      True
    • What does the Current Account record in the Balance of Payments?
      Trade, income, and transfers
    • The Income Balance reflects earnings from foreign investments and labor.

      True
    • Direct Investment involves establishing a lasting interest in or control over an enterprise.
    • What is the key difference between Direct and Portfolio Investment?
      Control versus no control
    • A Current Account surplus increases the demand for a country's currency.

      True
    • Inflows of foreign capital may strengthen a country's currency.
    • A Balance of Payments surplus can lead to export-led growth.
      True
    • What is the impact of currency devaluation on exports?
      Exports become cheaper
    • The Current Account records trade in goods, services, income, and current transfers
    • The Financial Account includes investments made by residents abroad and by foreigners
    • Match the Balance of Payments account with its contents:
      Current Account ↔️ Goods, services, income, transfers
      Capital Account ↔️ Transfers of capital ownership
      Financial Account ↔️ Investments by residents and foreigners
      Balancing Item ↔️ Ensures credit equals debit
    • The Financial Account is part of the Balance of Payments.

      True
    • The Trade Balance measures the difference between a country's exports and imports
    • Current Transfers in the Current Account include foreign aid, remittances, and other one-way payments
    • What is the Trade Balance calculated as in the Current Account?
      Exports minus imports
    • The Balance of Payments (BoP) is a comprehensive record of all economic transactions between a country and the rest of the world over a specific time period, typically a year
    • The Current Account reflects a country's trade balance and net income from abroad.

      True
    • The Income Balance in the Current Account includes profits, wages, and dividends
    • What is Foreign Direct Investment (FDI) classified under in the Balance of Payments?
      Direct Investment
    • Match the Capital Account component with its description:
      Direct Investment ↔️ Establishes lasting interest in an enterprise
      Portfolio Investment ↔️ Investments in financial assets without control
      Financial Flows ↔️ Movements of loans, currency, and other instruments
    • What happens to a country's currency when capital outflows occur?
      Depreciates
    • Which account in the Balance of Payments records trade in goods, services, and income?
      Current Account
    • The Capital Account influences a country's assets and liabilities
    • The Trade Balance is the difference between a country's exports and imports of goods and services.
    • What is included in Current Transfers within the Current Account?
      Foreign aid and remittances