Balance of Payments (Revision Quizlet Activity)

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

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

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)