essay - why is the balance of payments important in eco

the balance of payments is divided into the current account which is 

• merchandise trade, incomes and transfers 
• exports and imports - what we owe overseas 
• exports - imports, incomes and portfolio investment 
• when we have to pay our debts to other countries as part of external balance 

the capital account represents 

• the movement of money , loans and investments in and out of a country 
• a surplus on the australian balance of payments 
• made up of government borrowing, foreign portfolio and foreign direct investment 
• all of these options are correct 

australia has a current account deficit because of the .... component 

• incomes - paying back loans and returns on investments 
• transfers - helped those less advantaged as Australia with major aid and humanitarian work 
• exports - which have been greater than imports as we are a trade based nation 
• we have invested so much overseas and have to spend our money there 

Australia tends to have a trade surplus when the world economy is in a boom because 

• we are a net importer and in a world boom , richer countries demand is greater 
•  we are able to sell our products due to the depreciation of the global economies 
• we are a commodity export nation and our major markets take our lwio valued added raw material and transform and value add them 
• in a world boom , other countries have used their resources and need Australian exports desperately 

The balance of payments operates on the basis of credits and debits

• Credits on the current account mean money coming into Australia
• Debits on the current account mean money that must be paid to the government to cover trade protection
• Debits must always be covered by credits or the current account will be out of balance and the government will need to implement external balance policies
• on the current account a credit is money entering Australia and a debit is money leaving australia

The current account income deficit is made up of

• Lost wages for overseas workers
• International remittances
• Payments for loans ,profit repatriation , share dividends
• The income which must be paid from the GDP to cover the imports and debt

The incomes debit on the current Account is so important and large  because

• We spend less than we eArn and send that money overseas
• we rely so much on foreign investment and borrowing that must be paid back
•  incomes include the money earned by importers and it must be paid back to where they come from
• we have a lot of borrowing on the incomes account to pay for our spending

The capital account is dominated by

• Borrowing and investment from overseas to fund our domestic spending and investment
• International transfers, remittance and aid
• Foreign investment and the importing of capital equipment for future economic growth
• Economic growth from new share investment and increased exports

The sale of exported wheat to china would be categorised as

• Credit on current account trade balance
• Debit on current account exports
• Credit on income current account
• Credit on capital account official sales

Another example would be when foreign multinational company buys a controlling interest in an Australian company

• Credit capitall account portfolio investment
• Debit capital account direct investment
• Credit capital account direct investment
• Credit current account incomes