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Chapter 4 Year 12 Economics The Balance of Payments - Coggle Diagram
Chapter 4
Year 12 Economics The Balance of Payments
Current Account
Balance on goods and services + net income
Trends in the current account over the last decade and recently - last 2 years
Australian
data
Reasons for
trends
Causes of trends in current account over time
savings and Investment gap
National S & I 20 year average
Current account balance is equal to the difference between a country's S and I gap
equation and what happens when S & I are not equal
Significance of the current account deficit
If a country's current account balance decreases over time it does not necessarily mean it represents a weakness in the economy but - due to the following
1 a response to changes in the world economy
2 changes to domestic economic activity
3 changes in national S & I**
In Australia's case, remember the Financial account and how foreign investment is recorded on both accounts**
Australia's current account balance will decrease if...
Tot decreases
international competitiveness declines
a higher rate of Ec Growth
an increase in FI
decline in national S
increase in I -
explaining the current account balance
cyclical reasons
trade balance is volatile and influenced by the business cycle
ER
Others??
structural reasons
factors that affect the income balance eg foreign investment
Capital and Financial Account
Balance on capital account + Balance on financial account
2020 and 2021 data