Balance of payments
Which account would the following transactions be entered in?
- The sale of £2b worth of UK motor vehicles to Australia.
- Australian tourists spending £200m in the UK.
- The import of £1b computer products from the USA.
- The import of £250m worth of coffee beans from Brazil.
- The purchase of shares by a UK citizen, worth £10m, in a Brazilian firm.
- The payment of dividends to a German citizen who owns shares in a UK firm.
- What is meant by saying that the balance of payments always equals zero?
- Distinguish between a trade deficit and a current account deficit.
- Under what circumstances might a current account deficit be seen as a problem?
- Identify and explain three causes of a current account deficit.
- Assess the effectiveness of currency depreciation and fiscal contraction as a way of easing a current account deficit.