Balance of Payments

2 page summary of balance of payments

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  • Created on: 09-04-14 09:32
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Balance of payments
Balance of Payments
The balance of payments provides us with important information about whether or not a
country is "paying its way" in the international economy.
What is the Balance of Payments?
records all of the many financial transactions that are made between consumers,
businesses and the government in the UK with people across the rest of the World.
tell us about how much is being spent by British consumers and firms on imported
goods and services
how successful UK firms have been in exporting to other countries and markets. Why
is the export sector of the economy vital for the UK?
Trade in goods includes items such as: Manufactured goods Semifinished goods and
components Energy products Raw Materials Consumer goods (i) Durable goods e.g. DVD
recorder and new cars (ii) Nondurable goods e.g. foods and beverages Capital goods (e.g.
new plant and equipment)
Trade in services includes: Banking, insurance and consultancy services Other financial
services including foreign exchange and derivatives trading Tourism industry Transport
and shipping Education and health services Services associated with research and
development Cultural arts
Trade in goods
includes exports and imports of oil and other energy products
manufactured goods, foodstuffs, raw materials and components.
exporting and importing of tangible products
Trade in services
Overseas trade in services includes the exporting and importing of intangible
for example, Banking and Finance, Insurance, Shipping, Air Travel, Tourism and
Measuring the current account
comprises the balance of trade in goods and services plus net investment incomes
from overseas assets

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Net investment income arises from interest payments, profits and dividends from
external assets located outside the UK
We also add in the net balance of private transfers between countries and government
transfers (e.g. UK government payments to help fund the various spending programmes
of the European Union).…read more


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