Balance of payments

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What does the Balance of Payments record?
All financial transactions between UK and rest of the world
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What does the current account record?
1. exports and imports of goods and services 2. Primary and secondary income
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what does the balance of trade record?
Imports and exports
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what does it mean if the balance of trade is in the red?
There is a trade deficit
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Give two reasons why exports are so important
1. injection = AD increase. 2. increase jobs
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give two reasons why UK imports so much
1. We can't produce them 2. better quality than UK goods
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what protectionist measures can be put in place?
tarrifs, quotas, tax breaks embargos
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How can monetry policy improve balance of payments?
decrease intrest rates. so less demand for pound so exchange rates down. exports seem cheap so more. imports seem expensive so less.
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How can supply side policies improve balance of trade?
export promotion, education and training
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what is hot money?
people put money in countries with high intrest rates increasing demand for it.
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if you decrease intrest rates what will happen to the balance of trade
less hot money so less demand for pound, so exchange rate drop. so more exports less imports. = better balnce of trade
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Other cards in this set

Card 2

Front

What does the current account record?

Back

1. exports and imports of goods and services 2. Primary and secondary income

Card 3

Front

what does the balance of trade record?

Back

Preview of the front of card 3

Card 4

Front

what does it mean if the balance of trade is in the red?

Back

Preview of the front of card 4

Card 5

Front

Give two reasons why exports are so important

Back

Preview of the front of card 5
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