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Balance of Payments Definition A record of all transactions leading to international trade. This is between private individuals. Not Governments. Exports- Goods and services sold abroad. Imports- Goods and services bought abroad. Visible Trade The trade of physical goods. Balance of Trade- The difference between visible exports and visible imports. Busiest ports in the world • • • • • • • • 1. Shanghai 2. Singapore 3. Hong Kong 4. Shenzen 5. Busan 6. Ningbo-Zoushan 7. Guangzhou 8. Quingdao Invisible Trade • The trade of services. Balance of Payments The current account- The part of the balance of payments where all of the imports and exports are recorded. It includes both visible and invisible trade. Current Account • Goods • Services • Income • Current transfers- currency received with nothing received as a return. Capital Account Records the flow of money into and out of a country from transactions resulting to savings, investment and speculation. The effects of a current account deficit: Import more than Export An A increase in external debt. rise in unemployment Downward rate. Structural pressure on the exchange weakness- lack of investment. The effects of a current account surplus: Export more than Import Rising employment rates. Foreign currency reserves Domestic shortages if too many goods are sold abroad. A rising exchange rate will raise the price of exports which may affect demand in the future. A country with very high surplus means other countries will have a deficit. This could lead to international instability. The Government Governments payments. They prefer an equal balance of may take steps to ensure this. Import Tariffs Devaluing Currency