Balance of Payments (Quizlet Revision Activity) | tutor2u Economics
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Balance of Payments (Quizlet Revision Activity)

  • Levels: A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

Check and test your understanding of key terms relating to the balance of payments with this Quizlet revision activity

Forecasted percentage change on a year earlier of payments current account to GDP in the United Kingdom from 2017 to 2023

Summary of key terms on the balance of payments

Balance of payments

Records all financial transactions made between consumers, businesses and the government in one country with others

Balance of trade

The value of exports of goods and services minus value spent on imported goods and services

Capital account

Sale/transfer of patents, copyrights, franchises, leases and other transferable contracts, and goodwill

Current account

Overall balance of trade in goods and services and net balance for primary and secondary income

Current account deficit

A deficit occurs when the value of imports of goods/services / investment incomes / secondary incomes is greater than the value of exports

Current account surplus

A surplus occurs when the value of exports of goods/services / investment incomes / secondary incomes is greater than the value of imports

Financial account

Transactions that result in a change of ownership of financial assets and liabilities between countries

Foreign direct investment

Investment made by a firm or individual in one country into business interests located in another country

Hot money (short term capital) flows

Money that moves rapidly around the global financial system seeking the best "risk-adjusted" rate of return

Investment income

Income from equity (dividends) and on debt (interest)

Portfolio investment

Inflows and outflows of debt and equity

Primary income

Incomes from interest, profits, dividends from overseas investment and also migrant remittances


Transfers of money across national boundaries by migrant workers

Secondary income

Includes spending on military aid and overseas development aid

Trade deficit

When the value of imports is higher than the value of a country's exports (M>X)

Trade surplus

When the value of exports is higher than the value of a country's imports (X>M)

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