UK Balance Of Payments

The Balance of Payments is a record of a country’s transactions with the rest of the world. It shows the receipts from trade. It consists of the current and financial account

Current account

This is a record of all payments for trade in goods and services plus income flow it is divided into 4 parts

 

  1. Financial account

This is a record of all transactions for financial investment. It includes

(note the Financial Account used to be called the Capital Account)

 

  1. Capital Account

This refers to the transfer of funds associated with buying fixed assets such as land

In practice when the statistics are compiled there are likely to be errors  therefore the balancing item allows for these statistical discrepancies

Balance of Payments Equilibrium

The appreciation in the exchange rate would make exports less competitive and imports more competitive therefore with less X and more M there would be a deficit on the current account

 

 

 

Revision Notes - Balance of Payments

Balance of Payments

Causes of Deficit

Policies to reduce deficit

Balance of Payments problem or not?

International Trade