Balance of payments deficit
Balance of payments deficit Learning Objec-ve: To develop understanding of a balance of payments deficit and evaluate methods of rec-fying a deficit
Starter – The current account 0 1999
2000
2001
2002
2003
2004
-‐5000 -‐10000 -‐15000 -‐20000 -‐25000 -‐30000 -‐35000 -‐40000 -‐45000 -‐50000
Year
2005
2006
2007
2008
2009
Key terms • Current account – the balance of trade in goods and services plus net investment incomes from overseas assets • Balance of trade in goods – the export of goods from the primary and secondary sectors minus the imports of these goods • Balance of trade in services -‐ the export of ter-ary sector services minus the imports of these services
Key terms • Current account deficit – the value of imports exceeds the value of exports imports>exports • Current account surplus – the value of exports exceeds the value of imports exports>imports
Reasons for a balance of payments deficit • • • • • •
Loss of advantage in many industries Globalisa-on Growth of people’s real income Strong exchange rate Low levels of produc-vity and investment Rela-vely weak product innova-on
Task • In pairs your task is to mind map various policies that could be used to improve the current account deficit. – Use six hats thinking evaluate the effec-veness of these polices
Starter – The current account 0 1999
2000
2001
2002
2003
2004
-‐5000 -‐10000 -‐15000 -‐20000 -‐25000 -‐30000 -‐35000 -‐40000 -‐45000 -‐50000
Year
2005
2006
2007
2008
2009
Key terms • Current account – the balance of trade in goods and services plus net investment incomes from overseas assets • Balance of trade in goods – the export of goods from the primary and secondary sectors minus the imports of these goods • Balance of trade in services -‐ the export of ter-ary sector services minus the imports of these services
Key terms • Current account deficit – the value of imports exceeds the value of exports imports>exports • Current account surplus – the value of exports exceeds the value of imports exports>imports
Reasons for a balance of payments deficit • • • • • •
Loss of advantage in many industries Globalisa-on Growth of people’s real income Strong exchange rate Low levels of produc-vity and investment Rela-vely weak product innova-on
Task • In pairs your task is to mind map various policies that could be used to improve the current account deficit. – Use six hats thinking evaluate the effec-veness of these polices
