The balance of payments document discusses key components of a country's balance of payments including the current account, capital account, and financial account. It also defines important terms like the balance of trade, current account surplus and deficit, and causes and consequences of trade surpluses and deficits. For example, a current account deficit can be caused by a growing domestic economy or declining trade with partners, while a surplus means exports exceed imports.

1. The Balance Of Payments
CREATED BY : MS ENDANG

3. Components of the balance of payments
Current Account
 Trade in goods = this covers the exports and imports of goods such as
cars, tv and clothing.
 Trade in service = this covers the exports and imports of service, such as
services including shipping,tourism banking and insurance.
 Income = this includes income in the form of profits, interest and
dividends
 Current transfers = these covers payments made and receipts received for
which there is no corresponding exchange an actual goods or service

8. Notes
 Error is the difference that occurs due to a recording error or calculation error.
 Omission is a discrepancy that occurs due to trade or smuggling transactions or
drug trafficking or other unrecorded trades.
 An investment portfolio is a collection of assets in the form of stocks, bonds,
mutual funds, equities, commodities, deposits, cash or its equivalent, even bitcoin
owned by an individual or an institution.
 Assets Funding is an activity to collect funds from the public to become customers
in the form of financial products. The financial products in question include
deposits, savings, demand deposits, bonds, mutual funds, insurance and others.
 Net capital account keeps track of the net change in a nation's assets and
liabilities during a year.
 Net investment is the value of inward direct investment made by non-resident
investors in the reporting economy

10. The balance of trade in goods and
services
 Trade in goods
 Trade in services
 Exports
 import

11. Balance Of Payments Disequilibria
 Cause of current acount deficit
 A growing domestic economy
 Declining economic activity in trading
partners
 Structural problems

12. Consequences of a current account deficit
and a current account surplus
 The current account is in deficit when the total value of goods and service
exported is less than the total value of goods and service.
X < M
 The current acount is in surplus when the total value of goods and services
exported is greater than the total value of goods and service imported
X > M

13. How calculate the balance of trade in
goods and services
1. Find the balance in goods
2. Find the balance in services
3. Find the balance of trade by combining the totals
from the balance in goods and services

14. Credits Debits Net difference
Goods
Food, beverages,milk 100 40 60
Oil and fuel 0 100 -100
Manufactured good 400 350 50
Total goods 500 490 balance in goods 10
Services
Transport 200 100 100
Financial services 300 100 200
Total services 500 200 Balance in services
300
Current total Current balance 310

15. Based on the data above the balance of trade in goods
and services is?

16. Causes and Consequence of a Trade
Deficit
 If a country has insuificient domestic resources it has
to import lots of goods and services.
 Poor organisation and production
 The value of the country currency makes the price of
exports too high and imports too low

17. The impact for all trade deficit factors
 Increasing debt
 Loss of sovereignty
 Fall in value of the currency
 Imports become more expensive

18. Cause and Consequence of a Trade Surplus
 Its exports are in strong demand in other countries
 Its exports are competitively priced
The benefits :
 resulting in higher profits.
 Able to build up reserves of foreign currency =
invest in other countries

19. THE DRAWBACKS
 Bussines activity is focussing on producing goods for
exports at the expense of producing goods for
consumption in the home market
 A trade surplus will lead to a rise in the value of countries’
currency