Balance of Payments Basics
Balance of Payments
AO1·AO4
Syllabus requirement
Distinction between credit and debit items, and understanding what causes a surplus or deficit in an account.
Assessment objectives
AO1 Knowledge and UnderstandingAO4 Use of Appropriate Skills
Summary
The balance of payments (BOP) is the official record of all a country’s transactions with the rest of the world over a period, usually one year. It records money inflows (credits) such as exports and foreign investment, and outflows (debits) such as imports and repatriated profits; imbalances appear as surpluses or deficits and can affect domestic consumption, investment, exchange rates, inflation, competitiveness, employment and growth.