Lecture 12 Notes - ECN 211 Macroeconomic Principles L12...

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ECN 211 Macroeconomic Principles L12: Balance of payments (continued)
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RECAP: Balance of Payments Accounts Three main elements: Current Account Financial and Capital Account Statistical Discrepancy BOP = Current Account + Financial and Capital Account ± Statistical Discrepancy
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Current Account … the sum of merchandise (goods), services, investment income and unilateral transfers A positive number is a Current Account surplus A negative number is a Current Account deficit
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Merchandise … all transactions involving goods Balance of Merchandise account is referred to as the Balance of Trade If the balance of trade is in a surplus then Exports of merchandise > Imports of merchandise If the balance of trade is in a deficit then Exports of merchandise < Imports of merchandise
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Merchandise Exports of goods are credits (+) to the current account Imports of goods are debits (+) to the current account
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Services … all transactions involving services Examples: international students tuition, tourism, royalties, transportation costs, insurance premiums.
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