Balance of Payments

Current Account on the Balance of Payments

Exports are…

• Goods and services which are sold overseas

Imports are…

• Goods and services which are bought from other countries

Balance of Payments is…

• A record of all transactions relating to international trade

And is divided into two parts

Current Account

• Shows the value of all imports and exports over a period of time

• Includes both visible and invisible trade

• Also includes income from interest, profits, and dividends on assets owned overseas (export)

• And income paid in the form of interest, profits and dividends to the foreign owners of assets at home (imports)

Capital and Financial Imports

• Records flows of money into and out of a country resulting from transactions relating to savings, investments and speculation

Current Account Deficit and surpluses

Current account balance is…

• The difference between total exports and total imports (visible and invisible)

• Can be in deficit or surplus

Current account deficit occurs when…

• The value of imports is greater than the value of exports 

• This means that money is flowing out of the economy from international trade is greater than money flowing in

• The current account balance in negative

Current account surplus is when…

• Value of exports is greater than the value of imports

• Money flowing into the country resulting from international trade is greater than the money flowing out 

• Current account balance is positive

Visible and Invisible Trade

Visible trade is…

• To do with the buying…