International economics

Table of Contents

1. Topic pack - International economics - introduction
2. Section 3.1 International trade (notes)
3. Section 3.1 International trade (questions)
4. Section 3.1 International trade - simulations and activities
5. Section 3.2 Exchange rates (notes)
6. Section 3.2 Exchange rates - questions
7. Section 3.2 Exchange rates - simulations and activities
8. Section 3.3 Balance of payments - notes
   1. BOPs - introduction
   2. Credits and debits
   3. Current account
   4. Capital account
   5. Financial account
   6. Relationship between accounts
   7. Balance of payments - calculation
   8. Current account & floating exchange rate
   9. Current account & fixed exchange rate
   10. Balance of payments problems
   11. Consequences of deficit / surplus
   12. Policies to correct a balance of payments disequilibrium
   13. Consequences of a financial account deficit / surplus
   14. Marshall-Lerner condition
9. Section 3.3 Balance of payments - questions
10. Section 3.4 Economic integration - notes
11. Section 3.4 Economic integration - questions
12. Section 3.5 Terms of trade - notes
13. Section 3.5 Terms of trade - questions
14. Print View

BOPs - introduction

Syllabus: Outline the role of the balance of payments.

Definition: The Balance of Payments (BoP) is a record (account) of all currency flows into and out of an economy: It lists the reasons and amounts of these flows.

The balance of payments accounts record the financial flows between a country and the rest of the world. These flows result from trade, international investments, international borrowing and loan repayments.

This is really important to understand: Overall, the balance of payments accounts will always balance, although there may be deficits or surpluses on the various sections within the overall accounts. If there is a deficit in the trade of goods and services recorded in the current account, this will then be paid for by an inflow of funds recorded in the financial account (for example)

On the following pages, we consider the following topics in detail:

• Current account
• Capital account
• Financial account