2.1.1d

Question 1

define current account on the balance of payments

Answer 1

the value of imports and exports for a country

Question 2

what is a current account surplus

Answer 2

value of exports>value of imports

Question 3

what is a current account deficit

Answer 3

value of imports>value of exports

Question 4

what are visibles

Answer 4

goods

Question 5

what are invisibles

Answer 5

services

Question 6

define exchange rate

Answer 6

value of one currency in terms of another

Question 7

what happens to current account if the value of the pound increases

Answer 7

-if value of the pound increases
-exports will appear more expensive
-exports decrease
-imports will be cheaper
-imports increase
-current account deficit so worsens

Question 8

how does an increase in the value of the pound affect inflation

Answer 8

-decreases cost push inflation

Question 9

5 reasons for current account deficit

Answer 9

-increase in price of domestic good
-decrease in price of foreign good
-decrease in quality of domestic good
-increase in quality of foreign good
-increase in the value of the pound

Question 10

4 impacts of current account deficit

Answer 10

-leakage from the economy
-can be inflationary if prices rise abroad
-low demand for our exports
-problems finding foreign reserves to fund the
deficit.