Course review
Review each learning objective in this topic, then open its concept explanation or question set.
Learning objective
• Balance of payments records credit and debit items • Accounts can show surpluses or deficits • Calculation: elements of the balance of payments from data
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Learning objective
• Current account includes trade in goods, trade in services, income, and current transfers • Capital account includes capital transfers and transactions in non-produced non-financial assets • Financial account includes FDI, portfolio investment, reserve assets, and official borrowing
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Learning objective
• The balance of payments has an overall zero balance • Credits are matched by debits • Deficits are matched by surpluses
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Learning objective
• The current account balance relates to currency demand, supply, and exchange rate movements • Diagram [HL]: exchange rate showing relationship between current account balance and exchange rate
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Learning objective
• Financial account flows affect demand and supply for a currency • Capital and financial flows can influence exchange rates
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Learning objective
• Deficits have implications for exchange rates, interest rates, foreign ownership of domestic assets, debt, credit ratings, demand management, and growth • Correction methods include expenditure switching, expenditure reducing, and supply-side policies • Evaluation considers effectiveness of measures to correct persistent deficits
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Learning objective
• Marshall-Lerner condition explains when depreciation improves the current account • J-curve effect shows the possible short-run worsening before improvement • Diagram [HL]: J-curve with reference to the Marshall-Lerner condition
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Learning objective
• Surpluses have implications for domestic consumption and investment, exchange rates, inflation, employment, and export competitiveness • Evaluation considers domestic and international consequences
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