Balance of Payments

Identify the correct components of the balance of payments.

• Capital Account

• Current Account

• Non-Current Account

• Financial Account

Identify the correct relationship between the components in the balance of payments

• Current account + financial account deficit = capital account surplus

• Current account + capital account surplus = financial account deficit

• Financial account + capital account surplus = Current account deficit

• Financial account + capital account surplus = Current account surplus

Foreign investment in an Australian business would be a transaction in the ..,

• Capital Account

• Current Account

• Financial Account

Identify the correct examples of capital account transactions

• Foreign aid to build roads

• Buying and selling of land and water rights

• Exports of agricultural products to China

• Australian business borrowing from an overseas financial institution

What is required to improve this trend?

The UK current account increased from $500m to $600m.

• Include time period

• Include percentage change

• Give a reason for the change

• Include economic terminology, e.g. surplus/deficit

The current account includes:

• Balance on income

• Balance on current transfers

• Trade Balance

• Balance on capital

Which component of the current account has historically been negative?

• Balance on goods

• Balance on services

• Balance on income

• Balance on current transfers

Select the factors that are likely to affect the current account?

• Exchange rate

• Unemployment rate

• Strength of the world economy

• Free trade agreements

True or false? An Australian current account surplus leads to a financial/capital account deficit.

• True

• False

True or false? The balance of payments is always equal to zero.

• True

• False