Balance Of Payment

International Trade

Economics

Balance of Payments.

Balance Of Payments 1

International Economics 4

Balance Of Payments 1

International Economics 4

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.

Balance of Payments

A record of the trade between SA
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

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

 records current transfers between residents and non-residents. These transfers can be in cash or in kind. 

​Secondary Incomes

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

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

Topic Overview

What is Globalization?

Specialization and Trade,

Exchange Rates

The Balance of Payments

6/9/2024

Ibironke Sonuga Economics Year 11

Multiple Choice

Balance of trade is measure as

• Difference between import and export of goods

• Difference between import and export of services

• Difference between import and export of capital

• Difference between all exports and all imports

Multiple Choice

In which of the following categories are there transactions of balance of trade recorded?

• Visible items

• Invisible items

• Capital transfers

• All of these

Multiple Choice

Current account records transactions relating to

• Export and import of goods

• Non factor and factor income

• Current transfers

• All of these

Multiple Choice

Which of the following items related to BOP on capital account?

• Foreign investment

• Loans

• NRI remittances

• All of these

Multiple Choice

Which of the following are not included in balance of trade?

• Payment of interest and dividend

• Expenditure by tourists

• Borrowing from rest of the world

• All of these

Multiple Choice

If the value of visible exports exceeds the value of visible imports balance relates to;

• Current account BOP

• Capital account BOP

• Balance of trade

• None of these

Multiple Choice

Unilateral transfers are

• One sided payments

• Reciprocal payments

• Factor incomes

• None of these

Multiple Choice

Balance of payments is in this equilibrium when

• Capital account balance + capital account balance is not equal to zero

• Capital account balance + capital account is not positive number

• Capital account balance + capital account balance is not negative number

• All of these

Multiple Choice

Balance of trade is a part of

• Current account BOP

• Capital account BOP

• Official reserves account

• None of these

Multiple Choice

If balance of trade is showing deficit of rupees 200 crore and value of imports is rupees 900 crore, then, the value of exports would be

• Rupees 200 crore

• Rupees 500 crore

• Rupees 700 crore

• Rupees 900 crore

Multiple Choice

What is difference between the value of exports of goods and value of imports of goods called

• Balance of payment

• Balance of trade

• Disinvestment

• All of these

Multiple Choice

Kgothatso Chauke, a SA citizen, buys stock in a Japanese video game company. This transaction would be recorded as

• a credit to the SA

• a debit to the SA

Multiple Choice

The stock of physical and financial assets held by a country around the world is known as the

• International Investment Position

• Portfolio Investment Flows

• Investment income

• Foreign Direct Investment

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.

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

Multiple Choice

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

• Visible Trade

• Primary Incomes

• Invisible trade

• official transactions

Multiple Choice

The current account shows ...

• international movement of goods and services
• international movement of capital
• foreign exchange market
• international movement of investments

Word Cloud

Mention examples of Visible goods

Multiple Choice

Kgolagano Leso, a SA citizen, buys a villa in France. This would be registered on:

• The Balance of Trade in Goods

• The Balance of Trade in Services

• The Capital/Financial Account

• Investment incomes

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

Multiple Choice

Balance of payment is measured as

• Difference between visible items of exports and imports

• Difference between invisible items of exports and imports

• Difference between external and internal flow of gold

• Difference between all receipts of foreign exchange and payment of foreign exchange

Multiple Choice

Balance of trade is a part of

• Current account BOP

• Capital account BOP

• Official reserves account

• None of these

Multiple Choice

which is systematic record ofall the economic transactions between one country and rest of the world

• Balance of trade

• Balance of transactions

• Budget

• Balance of payments

Multiple Choice

How is the purchase of imported cars recorded in South Africa' BoP?

• As a goods credit in the current account

• As a goods credit in the income account

• As a goods credit in the capital account

• As a goods debit in the current account

Multiple Choice

How is spending by tourists visiting Block XX recorded in the BoP?

• As a service debit in the current account
• As an income credit in the current account
• As a service credit in the current account
• As a service credit in the capital account

Multiple Choice

How is the payment of interest on foreign loans recorded in Extension 7s BoP?

• As a primary income debit in the current account

• As a service debit in the current account

• As a foreign investment debit in the financial account

• As a secondary income credit in the current account

Multiple Choice

Expenditure by Toyota South Africa, on freight costs for imported cars, is recorded in the balance of payments as

• an income debit in the current account
• a service debit in the current account
• a service deficit in the current account
• an income deficit in the current account

Multiple Choice

Development aid is different from emergency relief in that

• it is responsive to natural disasters

• its aim is to build the productive capacity of the recipient

• it is impossible to plan in advance.

Multiple Choice

A payment for which nothing of economic value is received in return is called

• a transfer payment
• a waste of money
• a Dead Weight Loss

Multiple Choice

The South African govt spent R19m on the construction of the Thai-Laos Friendship bridge across the Mekong River. This payment was recorded in the Balance of Payments as

• a debit in secondary income
• a debit in the Financial account
• a capital transfer debit

Multiple Choice

The structural component of Australia's  Current Account Deficit (CAD) is

• the net income deficit.
• the trade balance.
• the fact that we spend too much on imports.

Multiple Choice

Australia's trade balance is

• always a deficit
• always a surplus
• the cyclical component of the CAD
• a national disgrace

Multiple Choice

An SA firm repays a loan to a German bank. How is this payment recorded in the Balance of Payments?

• A credit in the financial account.

• A primary income debit in the current account.

• A debit in the financial account.

• A primary income credit in the financial account.

Multiple Choice

The emergence of a surplus in the financial account would tend to

• reduce the net income deficit in the current account

• increase the net income deficit in the current account

• have no effect on the net income outcome.

Multiple Select

The switch to trade and current account deficits in recent years has resulted in

• a larger net income deficit.

• a financial account surplus.

• a smaller net income deficit

• no change to the financial account outcome because they are separate entities.

Multiple Choice

Which of the following is likely to see a rise in Australia's trade surplus?

• A reduction in overseas economic growth.

• A rise in global economic growth

• A rise in economic growth in Australia's major trading partners.

• A fall in economic growth in Australia's major trading partners.

Multiple Choice

How does the Balance of Trade (BOT) differ from the Balance of Payments (BOP)?

• BOT includes invisible items while BOP does not

• BOP is narrower in scope compared to BOT

• BOT only considers visible items while BOP includes all economic transactions

• BOP is only concerned with unilateral transfers

Multiple Choice

Currency depreciation results in

• Increased exports, increased imports
• Decreased exports, decreased imports
• Increased exports, decreased imports
• Decreased exports, increased imports

Multiple Choice

Balance of payment surplus will result in higher demand for domestic currency?

• True
• False

Multiple Choice

An increase in the exchange value of one nation's currency in terms of currency of another nation's is called...

• Depreciation of currency
• Appreciation of currency

Multiple Choice

Prices at which currencies are traded is called...

• Exchange Currency
• Exchange Rate
• Foreign Exchange Market
• Local Currency Demand

Multiple Choice

How is  the purchase of imported cars  recorded in SA's BoP?

• As a goods credit in the current account
• As a goods credit in the income account
• As a goods credit in the capital account
• As a goods debit in the current account