The Current Account and the Balance of Payments
- Created by: megan.arch
- Created on: 06-04-17 03:41
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- The Current Account and Balance of Payments
- Current Account
- The income earned by a country and expenditure it makes in dealings with other countries.
- Consists of for elements
- Trade in goods
- Trade in services
- Income Flows
- Current transfiers
- Balance of trade in goods and services
- Shows the flows of money coming in and going out of a country- result of trading
- Trade in goods
- Physical goods that a country trades
- Goods exports
- Goods exports are goods sold overseas bringing rev. into the country
- Good imports
- Goods imports are purchases made by a country of goods from other countries
- Goods exports
- Physical goods that a country trades
- Trade in services
- Non-physical traded items
- Banking
- Insurance
- Services exports
- Services sold to foreigners bringing revenue into the country
- Services imports
- Expenditures of services bought from outside of the country.
- Non-physical traded items
- Debits and Credits
- Debits
- Represent payments to countries where goods and services are imported from
- Credits
- Represent receipts from sales of exports
- Balance = credits - debits
- Debits
- Income flows
- 1. Add wages, salaries and other benefits received by a country's residents who are working abroad
- Deduct wages, salaries and earnings of foreign nationals working in the country
- 2. Add investment income earned by residents from overseas investment
- e.g profits
- Deduct investment income paid to overseas citizens with investment in the country.
- 1. Add wages, salaries and other benefits received by a country's residents who are working abroad
- Current Transfers
- Transfers of money goods or services that are not a part of the trading process.
- Sending presents or gifts
- Donations to charities
- Shows these 4 types of movements of money for trading and other current types of movement of money
- Transfers of money goods or services that are not a part of the trading process.
- Current Account
- Non-physical traded items
- Banking
- Insurance
- Services exports
- Services sold to foreigners bringing revenue into the country
- Services imports
- Expenditures of services bought from outside of the country.
- Exports- lead to inflows of money
- Imports- lead to outflows of money
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