A level Balance of Payments Quizzes

A level Balance of Payments Quizzes
(A level Revision Quizzes on Balance of payment for GCE and GCSE students)

Welcome guys. In this quiz, we are going to be looking at briefly the flow of money flows into and out of a country, BOP imbalances, and balancing Mechanisms. We all know that money in its state is never constant in an individuals hand, that is the same thing between countries, money is constantly in motion between nations, now this topic is going to let us in on how this money moves around.

 
Balance of payment, abbreviated BOP is simply the difference between money  flowing into a country, and money flowing out of that same country( money spent for things abroad or so to the rest of the world) at a particular period of time. A nation's BOP is a summary statement of all economic transactions between the residents in a country and the rest of the entire world in a particular period in time. BOP accounts are mainly current and capital accounts. Current account deals with recording of a countries transaction with the rest of the world more , it shows whether the net account of a country's income is in surplus or spending if it's in deficit. On the other hand, capital account records the net change in ownership of foreign assets.   

BOP Imbalances

Even though BOP has to be balance overall, surpluses and deficits on its individual element can lead to imbalance between countries. A country with deficit in their account will build up a lot of debt thereby finally giving a foreign country ownership to its access like collateral. These deficits are , 

-current account deficits.

- visible trade deficit and 

-a basic deficit.

The major cause of BOP imbalance are Current accounts like the governments fiscal deficit.

Balancing Mechanism

The balancing mechanism is provided by the International Monetary System which is aimed at providing mechanisms to correct imbalances. There are just 3 possible ways to correct BOP imbalances

-Adjustment of exchange rate: An upward shift in the value of a nations currency with respect to others will make a nation's exports less competitive, and make imports cheaper so will tend to correct the current account surplus.  

-Adjusting internal prices and demand: and

-Rules based adjustments 

This is a very broad topic which deals with a countries surplus and deficit, For more economics quizzes, click here

Please take the quiz to test you knowledge in BOP, if you want another quiz, just go to  gcequiz.com where you can find quizzes on many different subjects.  I bet you will find a lot of other interesting topics with quizzes.

Enjoy!!!