4.1.7 Balance of payments

    Cards (24)

    • The balance of payments (BOP) is a record of all economic transactions between the residents of a country and the rest of the world over a specific period, typically a year
    • The balance of payments must balance overall.
    • Match the BOP account with its description:
      Current Account ↔️ Includes trade in goods and services
      Capital Account ↔️ Records debt forgiveness
      Financial Account ↔️ Covers foreign direct investment
    • What does the current account represent in the balance of payments?
      Flow of goods, services, income
    • The trade balance is the difference between exports and imports of goods
    • Net current transfers include remittances and foreign aid.
    • Order the components of the current account:
      1️⃣ Trade in Goods
      2️⃣ Trade in Services
      3️⃣ Investment Income
      4️⃣ Net Current Transfers
    • What is the impact of a significant current account surplus or deficit on a country's economy?
      Economic stability and exchange rate
    • The capital and financial accounts record the transfer of capital and financial assets.
    • Match the account with its key elements:
      Capital Account ↔️ Debt forgiveness
      Financial Account ↔️ Foreign direct investment
    • FDI involves long-term control and physical assets
    • Portfolio investments focus on short-term gains in financial assets.
    • What is the mathematical representation of balance of payments equilibrium?
      Current \; Account + Capital \; Account + Financial \; Account = 0</latex>
    • The balance of payments must balance overall.
    • The current account includes the trade balance, net income, and current transfers
    • The balance of payments (BOP) is a record of all economic transactions between a country's residents and the rest of the world over a specific period.
    • Match the components of the BOP with their descriptions:
      Current Account ↔️ Trade in goods and services
      Capital Account ↔️ Records debt forgiveness
      Financial Account ↔️ Tracks foreign direct investment
    • The BOP must balance overall, meaning any current account deficit is offset by surpluses in the capital and financial accounts
    • A trade balance surplus occurs when exports exceed imports of goods.
    • Match the components of the current account with examples:
      Trade in Goods ↔️ Japan exporting cars to the U.S.
      Trade in Services ↔️ Tourism revenue from international visitors
      Investment Income ↔️ Dividends from stocks in overseas companies
      Net Current Transfers ↔️ Remittances sent by workers abroad
    • A significant current account surplus or deficit can impact a country's economic stability and exchange rate
    • In the balance of payments, a deficit occurs when total outflows exceed total inflows
    • A surplus in the balance of payments can lead to inflation.
    • Exchange rate devaluation lowers the value of a country's currency