Balance of Payments

Balance Of Payments 1

International Economics 4

International

Economics 4

Balance of Payments.

Topic Overview

What is Globalization?

Specialization and Trade,

Exchange Rates

The Balance of Payments

6/9/2024

Ibironke Sonuga Economics Year 11

Multiple Choice

What is globalization?

• Globalization is the concept of limiting technological advancements.
• Globalization refers to the act of promoting individualism within a society.
• Globalization is the process of interaction and integration among people, companies, and governments worldwide.
• Globalization is the process of isolating countries from each other.

Multiple Choice

What is international specialization?

• International specialization is when countries focus on producing goods and services that they can efficiently produce with available resources, while trading with other countries for goods and services that they cannot efficiently produce.
• International specialization is when countries focus on producing goods and services only for domestic consumption.
• International specialization is when countries focus on producing goods and services that they cannot efficiently produce with available resources.
• International specialization is when countries focus on producing goods and services without considering trade with other countries.

6/9/2024

Ibironke Sonuga Economics Year 11

BALANCE OF PAYMENT

A country's record of
monetary transactions with the rest of the world is known as Balance of
Payment.

Multiple Choice

Balance of payment is .......

• a record of all economic transactions between the residents of a country and the rest of the world
• a summary of a country's national income
• a measure of inflation rate
• a report on government spending

6/9/2024

Ibironke Sonuga Economics Year 11

BALANCE OF PAYMENT

Financial
Account

Current
Account

Capital
Account

6/9/2024

Ibironke Sonuga Economics Year 11

Current Account is made up of ...

Visible Trade

Invisible Trade

Primary Income

Secondary income

Trade in tangible goods, e.g. chair, bags, shoes etc.

​

​Visible Goods

Trade in services, intangibles: insurance, banking, shipping, etc.​

​Invisible Goods

Incomes from production: rewards for factors of production: rent, wages, profit and interest.

​

​Primary Incomes

Replace this with your body text.

​Duplicate this text as many times as you would like.

​

​Secondary Incomes

Multiple Choice

What is not a component of the current account in the balance of payment?

• Visible Trade

• Primary Incomes

• Invisible trade

• official transactions

6/9/2024

Ibironke Sonuga Economics Year 11

Exports and imports

An export is a good or service sold to overseas
residents resulting in a flow of income into the
exporting country

An import is a good or service purchased from
overseas producers resulting in an flow of income
out of the importing country

VISIBLE EXPORT
A physical product

sold to overseas

VISIBLE IMPORT
A physical product bought from

overseas

INVISIBLE

EXPORT

A service sold to
overseas residents

INVISIBLE

IMPORT

A service purchased

from overseas

residents

Word Cloud

Mention examples of Visible goods

6/9/2024

Ibironke Sonuga Economics Year 11

The balance of trade

Balance of trade = value of visible exports - value of visible

imports

Total value
of visible exports

Balance of trade surplus

Total value
of visible
imports

Balance of trade deficit

Total value
of visible
imports

Total value
of visible
exports

Balance on services = value of invisible exports - value of

invisible imports

​>

​<

​<

​<

​<

​<

​<

​<

​<

​<

​<

​<

​<

​<

​<

​<

​<

6/9/2024

Ibironke Sonuga Economics Year 11

The balance of payments current account

All monetary transactions
between a country and the
rest of the world are
recorded in its balance of
payments

The balance of payments on
current account records how well or
how badly a national economy is doing
in international trade in goods and
services

Credits: money received from
overseas

Debits: money paid
overseas

• Balance of trade
• Balance on services
• Balance on income
Income credits include wages, profits,
interest and dividends earned overseas by
residents
Income debits include wages, profits,
interest and dividends paid out to
residents of other countries
• Net current transfers
Including payments of taxes and excise
duties by visiting residents; cross-border
gifts, donations and overseas aid

6/9/2024

Ibironke Sonuga Economics Year 11

The balance on current account

The Terms of Trade looks at the
relationship between the price
received for exports and the amount
of imports we are able to buy with
that money.

Average Price of Exports

Terms of Trade = ----------------------------------------

Average Price of Imports

The Terms of Trade

6/9/2024

Ibironke Sonuga Economics Year 11

Balance of Payments

A record of the trade between the UK
and the rest of the world.

[Trade in goods +Trade in services +Income flows (Primary and Secondary)] = Current Account

Current Account+Capital Account =Balance of Payments

6/9/2024

Ibironke Sonuga Economics Year 11

​
[Transfer of funds and sale of assets and liabilities]= Capital Account

Multiple Choice

The balance of payment is the sum of ...

• exports and imports of goods and services, including financial transactions
• population growth and inflation rate
• government spending and revenue
• exports and imports of goods only

6/9/2024

Ibironke Sonuga Economics Year 11

CLASS ACTIVITY