balance of payments

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  • Created by: Fi Alade
  • Created on: 04-04-14 13:45
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  • The Balance of Payments
    • current account
      • trade in goods
      • trade in services
      • income balance
        • net income flows from non residents
          • interest, profits and dividends on assets owned abroad
          • repatriation of earnings from abroad
      • current transfers e.g. UK contribution to EU's CAP
    • capital and financial account
      • flows of money associated with saving, investment, speculation and  currenty stabilisation
        • short term capital flows e.g. hot money
        • FDI
        • portfolio investments in shares and bonds
      • reasons for international capital flows
        • speculation
        • bank to international bank lending
        • individuals transferring funds
        • Untitled
    • imbalances
      • surplus
        • aritificial lowering of exchange rate e.g. China
          • job creation and economic boost
        • reduce availability of goods
        • resukts in deficits in other countries
      • deficit
        • have to finance borrowing
          • risk of defaulting leads to reduction in lending
        • large problem if deficit grows faster than GDP
    • reasons for changes in current account
      • change in exchange rate
      • quality of goods
      • state of the economy

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