The+Balance+of+Payment

=BOP Video = = = = = =The purpose of the balance of payments is to record of all financial dealings with foreigners = =CURRENT ACCOUNT = =The part of the balance of payments accounts where the value of exports and imports is recorded. = = = =WHAT THE CURRENT ACCOUNT MIGHT LOOK LIKE = =UK’s CURRENT ACCOUNT 2002 = = = =£billion = = = =VISIBLE EXPORTS 700 = = = =VISIBLE IMPORTS 800 = = = =VISIBLE BALANCE - 100 = =INVISIBLE EXPORTS 300 = = = =INVISIBLE IMPORTS 100 = = = =INVISIBLE BALANCE + 200 = =TOTAL EXPORTS 1000 = = = =TOTAL IMPORTS 900 = = = =CURRENT BALANCE +100 = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">In this case the UK is importing more goods (visibles) than it is exporting. However, it is exporting more services (invisibles) than it is importing. Overall, the positive invisible balance outweighs the negative balance of trade and the UK has a healthy, positive current balance. = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">WHY COULD THE UK HAVE A DEFICIT (-) ON ITS GOODS BALANCE? = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Decline in manufacturing therefore fewer goods to export = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Lots of imports of goods from abroad = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Cheaper to import = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- High exchange rate £. This makes it more difficult to export but easier to import = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- A boom in the UK means that consumers and businesses have more money to spend on imports. = = = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Student task: = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Calculate a) Visible balance b) invisible balance c) current account balance = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">d) Try to explain each of the 5 points which could cause the UK to have a deficit on its trade in goods. = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">e) Classify the following items as visibles or invisibles = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Now attempt exercise 2 page 335 in your textbooks. = = = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Problems of deficits/surplus = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">the major problem of a deficit is that countries need to borrow money or attract in savings from abroad. Why might this be a problem? = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">traditionally a deficit is seen as worse than a surplus but remember that a large surplus means that someone has a large deficit. Will that country always be able to afford your exports? = = = = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Given the causes of a balance of payments deficit, list how a country could try to reduce this deficit =
 * || =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Exports = || =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Imports = ||
 * =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Visible = || =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">104 = || =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">114 = ||
 * =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Invisible = || =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">117 = || =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">114 = ||
 * =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Transport =
 * =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Insurance =
 * =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Banking =
 * =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Steel =
 * =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Coal =
 * =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Cars =