Questions and Answers about Balance of Payment
Question 1
a.
The strongest economy is USA (GDP per capita, $PPP; 48,110), second strongest economy is UK (35,600), follow by Eurozone economy (35,280) and the weakest economy is China (8,400). For compare economies performances I used indicator of GDP per capita with $PPP (Purchasing power parity) because every economy have differences in population and in purchasing power parity. For example; China have higher population than USA and that mean more working people in economy (Reason for per capita). Also living cost and price of standard basket of goods and services is higher in USA than in China ( Reason for PPP).
b.
When I compared ranking of economies in table 1.(2011) and table 2. (2010) there is a difference in ranking. The strongest economy is still USA but second is Eurozone follow by UK and the weakest is China. When you compared performances of these four economies with table 1. and 2. all data indicators for 2010 are worse than for 2011. Some economies growth up faster than others.
Question 2
a.
The current account and the capital account constitute a country's balance of payments. The capital account indicate net change in ownership of national assets. The capital account is the net result of private and public international investments flowing in and out a country. The capital account comprise FDI (foreign direct investments), financial derivatives, portfolio and changes in the reserve account (Santos,2013).
The current account comprises the balance of trade (Export – Import), net current transfers and net income. The current account balances is affected by several factor; its exchange rate, forex reserves, inflation rate, trade policies, competitiveness and others(Santos, 2013).
Theoretically, the balance of payments should be in balance. However when an economy has positive capital accounts, the country's debits are more than its credits. This is generally means that a current account is in deficit. An inflow of money indicate that
a.
The strongest economy is USA (GDP per capita, $PPP; 48,110), second strongest economy is UK (35,600), follow by Eurozone economy (35,280) and the weakest economy is China (8,400). For compare economies performances I used indicator of GDP per capita with $PPP (Purchasing power parity) because every economy have differences in population and in purchasing power parity. For example; China have higher population than USA and that mean more working people in economy (Reason for per capita). Also living cost and price of standard basket of goods and services is higher in USA than in China ( Reason for PPP).
b.
When I compared ranking of economies in table 1.(2011) and table 2. (2010) there is a difference in ranking. The strongest economy is still USA but second is Eurozone follow by UK and the weakest is China. When you compared performances of these four economies with table 1. and 2. all data indicators for 2010 are worse than for 2011. Some economies growth up faster than others.
Question 2
a.
The current account and the capital account constitute a country's balance of payments. The capital account indicate net change in ownership of national assets. The capital account is the net result of private and public international investments flowing in and out a country. The capital account comprise FDI (foreign direct investments), financial derivatives, portfolio and changes in the reserve account (Santos,2013).
The current account comprises the balance of trade (Export – Import), net current transfers and net income. The current account balances is affected by several factor; its exchange rate, forex reserves, inflation rate, trade policies, competitiveness and others(Santos, 2013).
Theoretically, the balance of payments should be in balance. However when an economy has positive capital accounts, the country's debits are more than its credits. This is generally means that a current account is in deficit. An inflow of money indicate that
References: Santos C. with Higginson M., Himmelweit S., Howells P., Lowe J., Mackintosh M., Morgan W., Parris S., Simonetti R., Stone H. and Trigg A. (2013) Running the economy Heakal R., (2013) Balance of payment, www.investopedia.com