Balance of Payments (BOP) Accounts- Macro 6.1

Mr. Clifford explains the balance of payments, focusing on the current and financial accounts. Using the U.S. and China as examples, he illustrates trade deficits and surpluses, and how these affect the financial account. The video concludes with a graph showing the relationship between current account deficits and financial account surpluses.

What are the two main components of the balance of payments?

• Current account and financial account

• Surplus account and deficit account

• Export account and import account

• Trade account and investment account

What does a trade deficit indicate about a country's imports and exports?

• Exports are greater than imports

• Imports are greater than exports

• Exports and imports are equal

• Neither exports nor imports are significant

If the United States has a trade deficit with China, what does China have with the United States?

• Trade deficit

• Trade surplus

• No trade relationship

• Balanced trade

What does the financial account primarily deal with?

• Currency exchange rates

• Net transfers

• Assets and investments

• Goods and services

What happens to the financial account when a country has a current account deficit?

• It also shows a deficit

• It shows a surplus

• It becomes negative

• It remains unchanged