CHAPTER 17 TEXTBOOK CARDS

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When does a current account deficit occur?
When the value of exported goods and services exceeds the value of imports
1 of 16
2 other items in the current account?
1.Net income flows 2.Net current transfers
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What is the balance of trade in goods?
Visible trade balance. Includes the value of goods exported minus the value of goods imported
3 of 16
3 sources of income in British Empire?
1.Interests 2.Profits 3.Dividends on UK assets abroad
4 of 16
What are net income flows?
Difference between these inward and outward flows of interest, profits and dividends
5 of 16
If net income flows are positive then...?
UK companies own more profitable assets in the rest of the world than foreign multinationals own in the UK
6 of 16
Net current transfers?
Consists mainly of government transfers to and from overseas organisations including the EU
7 of 16
Current Balance?
Difference total exports and total imports or the sum of the balance of trade in goods, the balance of trade in services and the balance of income flows and current transfers
8 of 16
3 main components of the UK's financial account records?
1.Net foreign direct investment = net acquisition of productive assets by UK firms overseas & by foreign firms in UK 2.Net portfolio investment 3.Other capital flows
9 of 16
3 benefits of growth of international capital flows?
1.Promotes growth of world trade 2.Generates a source of finance for firms (LEDC'S) 3.Foreign direct investment facilitates transfer of technology between firms & countries
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3 disadvantages of growth of international capital flows?
1.Difficulties in one sector of financial system can affect global financial system 2.Foreign direct investment may lead to global dominance of multinational firms 3.Large scale 'hot money' flow of funds between currencies
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When does a B of P equilibrium occur?
When exports are equal to imports over a number of years. Refers to the current account
12 of 16
2 expenditure reducing policies?
1.Fiscal -EG. An increase in income tax to reduce disposable income 2.Monetary Policy - EG. Increasing interest rates to depress consumer spending
13 of 16
2 expenditure switching policies?
1.Direct controls = Import controls 2.Devaluation = Devalue the currency
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Effects of devaluation and price elasticity of demand?
Devaluation should make exports more price competitive and lead to more exports being sold. May not lead to a fall in the value of imports
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3 policies to control or reduce a B of P surplus?
1.Reflation=reduce interest rates/reduce income tax 2.Removing direct controls on imports=Increase free trade 3.Revaluation=Increasing value of currency in a fixed or semi fixed exchange rate.
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Other cards in this set

Card 2

Front

2 other items in the current account?

Back

1.Net income flows 2.Net current transfers

Card 3

Front

What is the balance of trade in goods?

Back

Preview of the front of card 3

Card 4

Front

3 sources of income in British Empire?

Back

Preview of the front of card 4

Card 5

Front

What are net income flows?

Back

Preview of the front of card 5
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