2.1.4: Balance of Payments

• Balance of Payments: A record of all financial transactions between one country and all other countries
• Components of Balance of Payment:

  Current Account

  Capital + Financial account
• Current account records payment for the purchase and sale of goods and services
• Capital and Financial accounts record money associated with saving and investment
• Parts of the current account:

  Trade in goods: All raw materials or finished goods that are traded

  Trade in services: Services trades in and out of the country like holidays. A holiday to Spain is an import as money is taken out of the UK and given to Spain
• Current account surplus: Where exports > imports
• Current account deficit: Where exports < imports