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BOP SFLS accounts part 1
- 2. Macro Economic Goals 1.) Full employment About 5% unemployment 2.) Stability (Prices) 3.) Economic growth 4.) Balance of Payments Equilibrium About 2% inflation About 3% growth (7% in China) Keep trade deficits low, but no percentage number as a guide All countries have these main goals, this part is about goal number 4
- 3. And help explain how this works.
- 5. Balance of Payments: 1.) Some Vocabulary 2.) The Accounts 3.) Balance between Accounts 4.) Balance between Countries 5.) States of Equilibrium PPT 1 PPT 2 PPT 36.) Problems with Deficit/Surplus 7.) Disequilibrium
- 6. Balanced trade: Trade deficit 逆差: - A country imports more than it exports - A country exports more than it imports Trade surplus 贸易顺差: - When exports = imports Measuring the current account 1.) Some Vocabulary Trade surplus Trade deficit Amount of exports
- 7. Debtor nation 债务国 - A country that has borrowed more from the rest of the world than it has lent to it. Creditor nation 债权国 - A country that has invested more in the rest of the world than other countries have invested in it. 1.) Some Vocabulary Creditor nation Debtor nationAmount of exports
- 8. Credit: - An increase on the balance statement, Income Debit: - A decrease on the balance statement, Payments 1.) Some Vocabulary Gross: 毛收入 - Total amount made as a result of some activity. ex… total profit, total sales, total imports. Net: 净收入 - Refers to the amount left over after all deductions 扣除 are made. ex… net profit, net sales, net imports. If I give you 5 and you give me 3, I totally gave you 5 (gross) but I (net) gave you 2 more then you gave me
- 9. Interest: 金钱利益 Hard definition: - A fee paid by a borrower of assets to the owner as a form of compensation赔偿 金for the use of the assets. Easy definition: - The price of money. If I give you 100 dollars at 5% interest, you promise to pay me back 105 dollars at the end of the deal. 1.) Some Vocabulary
- 10. Stocks: 股票 - Are a claim to partial ownership in a firm. ex… stocks in Apple, Google, IBM Bonds: 债券 - Are certificates证书 that the bond issuer promises to pay back (loan) ex… Government bonds, Treasuries 国债 T-bills, Securities. Stock market Bond market 1.) Some Vocabulary
- 11. Direct Investment: - Investment in business and things that give foreigners direct control in them. Portfolio Investment: - Investment in stocks, bonds and things in which foreigners don’t control. 1.) Some Vocabulary Direct investment Portfolio investment 我的 我们的
- 12. Balance of Payments: 1.) Some Vocabulary 2.) The Accounts 3.) Balance between Accounts 4.) Balance between Countries 5.) States of Equilibrium 6.) Problems with Deficit/Surplus 7.) Disequilibrium
- 13. Balance of Payments: Goal: The (typical) goal of (almost) every country is to have a balanced trade. (usually) The balance of payments is the way the measure trade between countries and one of the main components 部件 of measuring economies generally.
- 14. Current account - A measurement of the overall health of the economy. - Measures the overall balance in trade and income and transfers. 3 main accounts: Balance of Payments
- 15. Capital account - Direct investment in capital and fixed assets by public and private investors, foreign or domestic. - Change in assets资产 that typically don’t directly affect income. Current account 3 main accounts: Balance of Payments
- 16. - Investments that are divided by the type of investment by public of private investors, foreign or domestic. - Change in portfolio or direct investment in assets that are directly used to earn income. Financial account Capital account Current account 3 main accounts: Balance of Payments
- 17. Current account Capital account Financial account Balance of Payments This is basically the Stuff and Income side This is basically the Investments and money side
- 18. Current account Capital account Financial account Balance of Payments Trade of goods “Visible Trade” - Stuff – actual physical goods.
- 19. Current account Capital account Financial account Balance of Payments Trade of goods “Invisible Trade” - Service jobs and services provided. ex. - airline tickets, teachers, assistants Trade of services
- 20. Current account Capital account Financial account Balance of Payments Trade of goods Trade of services - Not investments itself, but the income from investments made in a foreign country. - ex- Stocks income, Bonds income, interest in banks. Income
- 21. Current account Capital account Financial account Balance of Payments Trade of goods Trade of services Income - Unilateral 单方面 money exchanges - Ex - Government aid, gifts, cash, migrant workers Current Transfers
- 22. Current account Capital account Financial account Balance of Payments - Direct investment in capital and fixed assets by public and private investors, foreign or domestic. - Change in assets资产 that typically don’t directly affect income.
- 23. Current account Capital account Financial account Balance of Payments Investments in physical things自然 对象from foreign governments or foreign citizens. -ex- -A mine,矿山 - but not the diamonds they make. -A house - but not the rent 租 made from it. -A diplomatic building – embassy 大 使馆 Non – Financial assets 非金融资产
- 24. Current account Capital account Financial account Balance of Payments Non – Financial assets 非金融资产 Equipment used to make things, but not the things they make. -ex- mining equipment restaurant equipment house repairs Fixed assets 固定资产
- 25. Current account Capital account Financial account Balance of Payments Investments that are expected to make money. - ex – stocks, bonds, holding of currency. Financial assets 金融资产
- 26. Current account Capital account Financial account Balance of Payments - Investments that are divided by the type of investment by public of private investors, foreign or domestic. - Change in portfolio or direct investment in assets that are directly used to earn income.
- 27. Current account Capital account Financial account Balance of Payments Direct Investment - Investment in business and things that give foreigners direct control in them. Non – Financial assets 非金融资产 Fixed assets 固定资产
- 28. Current account Capital account Financial account Balance of Payments Direct Investment Non – Financial assets 非金融资产 Fixed assets 固定资产 Portfolio Investment - Investment in stocks, bonds and things in which foreigners don’t directly control.
- 29. Current account Capital account Financial account Balance of Payments Direct Investment Non – Financial assets 非金融资产 Fixed assets 固定资产 Portfolio Investment 搞砸了计数 Statistical discrepancy Off-sets
- 30. Current account Capital account Financial account Balance of Payments Direct Investment Non – Financial assets 非金融资产 Fixed assets 固定资产 Portfolio Investment Off-sets The foreign currency held by the government. (changes exchange rates) Official Reserves
- 31. Current account Capital account Financial account Balance of Payments This is basically the Stuff and Income side This is basically the Investments and money side So, again summarizing…
- 33. Current account Financial account Some examples…Balance of Payments Trade of goods What if you are from China and you buy a car that is from the United States? Capital account
- 34. Current account Some examples…Balance of Payments Trade of goods What if you are Chinese and you buy an American-made iphone? Financial account Capital account
- 35. Current account Some examples…Balance of Payments Financial account What if you are Chinese and you buy Apple stock? Financial assets 金融资产 Portfolio Investment Capital account
- 36. Current account Some examples…Balance of Payments What if you are an British and you buy a house in India to live in? Financial account Non – Financial assets 非金融资产 Capital account
- 37. Current account Some examples…Balance of Payments What if you are an American that goes to Chia and gets a really great tattoo while in China? Capital account Financial account Trade of services
- 38. Current account Some examples…Balance of Payments What if you are an American and you send Foreign aid to Kenya in Africa? Capital account Financial account Current Transfers
- 39. Current account Some examples…Balance of Payments What if you are Italian and you go to Las Vegas 拉斯维加斯 and gamble 赌 all your money? Capital account Financial account Trade of services
- 40. Current account Some examples…Balance of Payments Capital account Financial account What if you are Italian and you go there are you just buy the casino?赌场 Direct Investment
- 41. Current account Financial account Some examples…Balance of Payments Trade of goods What if you are from China and you buy some food in KFC that is from the United States? Capital account
- 42. Current account Financial account Some examples…Balance of Payments Capital account What if you are from China and you buy a KFC that is from the United States? Direct Investment
- 43. Current account Financial account Some examples…Balance of Payments Capital account Fixed assets 固定资产 Income What if when you buy that KFC in the US and you later buy a new deep fryer oven油炸锅 for it?
- 44. Current account Financial account Some examples…Balance of Payments Capital account Income What if that KFC earns you income and you take that income back to China?
- 45. Current account Some examples…Balance of Payments What if you are an British diplomat and the British government buys an embassy in France? Financial account Non – Financial assets 非金融资产 Capital account
- 46. Current account Some examples…Balance of Payments What if you buy a Starbucks coffee in a foreign country? Financial account Capital account Trade of goods Direct Investment
- 47. Current account Some examples…Balance of Payments Financial account Capital account Trade of goods What if you buy a Starbucks store in a foreign country? Direct Investment
- 48. Current account Some examples…Balance of Payments What if you don’t buy the Starbucks store but you just buy stock in the company? Financial account Capital account Portfolio Investment
- 49. Current account Some examples…Balance of Payments What if you buy a solar panel from China for your house in Mexico? Financial account Capital account Trade of goods
- 50. Current account Some examples…Balance of Payments Financial account Capital account Fixed assets 固定资产 What if you have a Chinese company in Mexico and you buy solar panels for it?
- 51. Current account Some examples…Balance of Payments What if you Chinese and you buy US treasury bills? (government bonds) Financial account Capital account Financial assets 金融资产 Portfolio Investment
- 52. Current account Some examples…Balance of Payments What if you are from Japan and buy a bridge in the United States just because you like bridges? Financial account Capital account Non – Financial assets
- 53. Current account Some examples…Balance of Payments Financial account Capital account What if you just buy a bond that is used to build a bridge? Financial assets 金融资产 Portfolio Investment
- 54. Current account Some examples…Balance of Payments What if you are American and you sell a jet fighter to Syria? Financial account Capital account Trade of goods
- 55. Current account Some examples…Balance of Payments What if you are Chinese and you go to see the Lakers in America? Financial account Capital account Trade of services
- 56. Current account Some examples…Balance of Payments Financial account Capital account Trade of services What if you are Chinese and you just go buy the Lakers in Los Angeles? Non – Financial assets Trademarks and patents are a part capital assets. But some parts of the deal might be in the financial account.Direct Investment
- 57. Current account Some examples…Balance of Payments What if you make money from the Lakers tickets Financial account Capital account Trade of services What if you are Chinese and you just go buy the Lakers in Los Angeles? Non – Financial assets Trademarks and patents are a part capital assets. But some parts of the deal might be in the financial account.Direct Investment
- 58. Current account Some examples…Balance of Payments What if you make money from the Lakers ticker sales and you take that money back to China? Financial account Capital account Income
- 59. Balance of Payments So to summarize…
- 60. Current account Capital account Financial account Balance of Payments This is basically the Stuff and Income side This is basically the Investments and money side
- 61. Capital account Financial account Financial account Off-sets Non – Financial assets Fixed assets Capital account Official Reserves Portfolio Investment Direct Investment Income Current Transfers Trade in Goods Trade in Services Current account Balance of Payments All the accounts
- 62. Balanced trade: Trade deficit 逆差: - A country imports more than it exports - A country exports more than it imports Trade surplus 贸易顺差: - When exports = imports Measuring the current account 1.) Some Vocabulary Trade surplus Trade deficit Amount of exports
- 63. Direct Investment: - Investment in business and things that give foreigners direct control in them. Portfolio Investment: - Investment in stocks, bonds and things in which foreigners don’t control. 1.) Some Vocabulary Direct investment Portfolio investment 我的 我们的
- 64. Income Current Transfers Trade in Goods Trade in Services Financial account Financial assets Off-sets Non – Financial assets Fixed assets Capital account Official Reserves So Wait! I didn’t explain a very important thing that is apart of this! Balance of Payments Current account Capital account Financial account
- 65. Income Current Transfers Trade in Goods Trade in Services Financial account Financial assets Off-sets Non – Financial assets Fixed assets Capital account Official Reserves This part Balance of Payments Current account Capital account Financial account
- 66. Current account Income Current Transfers Trade in Goods Trade in Services Capital account Financial account Financial account Financial assets Off-sets Non – Financial assets Fixed assets Capital account Official Reserves For now I will tell you that governments hold other money from other countries all the time, either for saving or for use if people need to exchange money. This will be important when dealing with exchange rates. But I think I will get into that later… Balance of Payments
- 67. Hurray! Balance of Payments Even more examples…
- 68. Current account Even more examples…Balance of Payments You are a German restaurant owner that buys a bunch of American hamburgers to sell in your home country. Financial account Capital account Trade in Goods
- 69. Current account Even more examples…Balance of Payments You are a German restaurant owner that buys an American restaurant to sell hamburgers in America. Financial account Capital account Direct Investment Financial assets 金融资产
- 70. Current account Even more examples…Balance of Payments You are a German restaurant owner that owns an American restaurant and you want to bring your profits back to Germany. Financial account Capital account Income
- 71. Current account Even more examples…Balance of Payments You are a Canadian that buys stock in American airlines Financial account Capital account Portfolio Investment Financial assets 金融资产
- 72. Current account Even more examples…Balance of Payments You are a French business man that buys a vacation home in Mexico. Financial account Capital account Non – Financial assets
- 73. Current account Even more examples…Balance of Payments You are an American tourist that gets a tattoo from a Thailand firm. Financial account Capital account Trade of services
- 74. Current account Even more examples…Balance of Payments You are an American organization that donates several thousand dollars to Indonesia to help families that have been hurt by an earthquake. Financial account Capital account Current Transfers
- 75. Current account Even more examples…Balance of Payments You are an Australian that owns a school in Indonesia that you decide to replace the basketball court because it was destroyed by an earthquake. Financial account Capital account Fixed assets 固定资产
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