- Outline the role of the balance of payments.
- Distinguish between debit items and credit items in the balance of payments.
- Explain the four components of the current account, specifically the balance of trade in goods, the balance of trade in services, income and current transfers.
- Distinguish between a current account deficit and a current account surplus.
- Explain the two components of the capital account, specifically capital transfers and transaction in non-produced, non-financial assets.
- Explain the three main components of the financial account, specifically, direct investment, portfolio investment and reserve assets.
- Explain that the current account balance is equal to the sum of the capital account and financial account balances.
- Examine how the current account and the financial account are interdependent.
- Explain why a deficit in the current account of the balance of payments may result in downward pressure on the exchange rate of the currency.
- Explain why a surplus in the current account of the balance of payments may result in upward pressure on the exchange rate of the currency.
You will be given a copy of the following to complete...
Check out this link to a Slideshare presentation
Fixed exchange rates
Continue on with the booklet you were given to address the objectives for fixed and managed exchange rates. You will be given another handout which you will use to evaluate the exchange rate systems (plus see textbook p292-294)
Freely floating exchange rates
You will be given a copy of this to fill in... but if you lose it then here is one to download and print out...
Use p 311-312 Blink/Dorton to complete this page
Preferential trade agreements
Click here for the stages of economic integration and here for the advantages and disadvantages of trading blocs
Use the article "What is meant by Economic Integration? Is it Efficient within the EU?" to answer the following questions:
Each of the following articles regarding trade and protectionism have questions to be answered...
Here is an interesting article on the effect of subsidies paid to cotton farmers in America:
Teacher of IB Economics at the American School of Budapest