Balance of Payments and The Trade Cycle

The balance of payments is a record of the financial dealings between economic agents of one country and all other countires. The balance of payments can be split into two components; the current account and capital account.

The Trade Cycle and its Stages

It has been observed in economies that income and employment tends to fluctuate over time. These regular fluctuations are known as trade or business cycles.

The avergae growth in the UK has been around 1.5% in the past 100 yeats. During the 1980s the figure was near 2.5%. 

There are four stages to the trade cycle:

BOOM- Business expectations high, sales high, stocks low, output near capacity, profits and investment high, unemployment low with labour shortages, prices rising.

RECESSION- Optimism fades, fall in…