Balance of Payments components

1. Balance of Payments
The Balance of Payments is a record of economic transactions between citizens of
one nation and the citizens of the rest of the world over the period of a year. The
first part is the Current Account.
The Current Account consists of four parts:
1. Trade in goods: such as foods, drinks, cars, shoes.
This shows the relationship between revenue from
exports and costs on imports. Typically the UK
spends more on imports than it receives in Exports.
This means that they Trade in Goods balance is
normally a deficit.
2. Trade in Services: such as aviation or banking. The
UK typically has a surplus in these areas, which is
different from the trade in goods. This means that
we export more services than we import.
3. Investment Income: This covers profits, interest and dividends. For
example if a UK citizen owns shares in an American company, the dividend
will be sent back to the UK as a credit.
4. Current Transfers: This is simply payments to and
from a nation in which there is no transfer of goods of
services. This can be for example payments from the
UK Government to the EU.