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Current Account Of Balance Of Payments, PIC - Coggle Diagram
Current Account Of Balance Of Payments
current account
Calculate the current account
Current account deficit
Current account surplus
Balance of trade in goods, Balance of trade in services, Balance of trade in primary and secondary income.
Definition
Balance of payment
Income statement thats for country instead of firm that reports all financial report
current account
Key account in the balance of payment of a country
Components of balance of payments
Trades in services
Primary income
Trade in goods
Secondary income
Trade Imbalances
Trade Surplus
Government policy
Lower interest rate
use expansionary fiscal policy
Do nothing and let expansionary fiscal correct it
Remove trade barriers
Problems
increase in income from exports may cause a demand push inflation when it is spent on domestic economy
increase the price of export in international markets because increase increase in currency because of spike in demand for the national currency and a decrease on its supplies
May be political and economic pressure on the government from other countries to reduce its trade surplus so they can reduce its trade deficits
Making export price low and imports high to keep low exchange rate
Trade Deficit
Government policy
use contractionary fiscal policy
Do nothing, floating exchange rate will correct it
Introduce trade barries
Raise interest rates
Problems
because more currency is being supplied to pay for than overseas demand to buy exports, the value of exchange rate will fall
to overcome annual deficit a country may need to borrow money overseas
Allows country to consume more than it produce
