ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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As a goods credit in the current account
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As a goods credit in the income account
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As a goods credit in the capital account
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As a goods debit in the current account
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Detailed explanation-1: -Any time an item (good, service, or asset) is exported from a country, the value of that item is recorded as a credit entry on the balance of payments. Any time an item is imported into a country, the value of that item is recorded as a debit entry on the balance of payments.
Detailed explanation-2: -The balance of payments accounts keep systematic records of all the economic transactions (visible and non-visible) of a country with all other countries in the given time period. In the BoP accounts, all the receipts from abroad are recorded as credit and all the payments to abroad are debits.
Detailed explanation-3: -The UK generally imports more than it exports meaning that it runs a trade deficit. A deficit of £230 billion on trade in goods was offset by a surplus of £145 billion on trade in services in 2022. The overall trade deficit was £85 billion in 2022.
Detailed explanation-4: -In simple terms, this means that the UK government has been borrowing to cover the difference between its outgoings and its tax revenues – the fiscal deficit. The current account deficit indicates that the UK economy as a whole is borrowing from the rest of the world.