This is not a simple course. In this document, I have summarized the entire course material as well as provided small additional information to help you further your understanding and score higher on tests and exams. I highly recommend printing and binding these notes, then taking them to lectures ...
CHAPTER 13: NATIONAL INCOME ACCOUNTING & THE BALANCE OF
PAYMENTS (BOP)
BALANCE OF PAYMENTS
→ The Balance of Payments (BOP) is a statement that records all monetary transactions between
residents of a country and the rest of the world over a given time period
→ Individuals, firms, governments, and government agencies in the reporting/foreign country are
considered residents
→ The BOP's main purpose is to assist the government in developing monetary, fiscal, and trade
policies
Credit transactions (+):
→ Transactions involving the payment of funds from foreign sources
→ Examples: Exports of goods and services, as well as unilateral transfers (gifts or donations)
from foreigners and foreign investment in this country's government bonds/companies
Debit transactions (-):
→ Transactions in which funds are paid to foreign sources
→ Examples: Imports of goods and services, as well as unilateral transfers (gifts or donations) to
foreigners and foreign investment in foreign government bonds/companies
The BOP consists of:
1. Current Account
2. Financial account
3. Capital Transfer Account
4. Unrecorded transactions
1. Current Account
→ Visible trade: Net export and import of goods (tangible items). Purchases of raw materials,
intermediate and finished goods are examples of transactions.
→ Invisible trade: Net export and import of goods (intangible items). Transactions primarily
consists of shipping, IT, banking, and insurance services.
→ Unilateral transfers to and from abroad: Gifts or donations sent by a non-resident relative to a
resident of a country
→ Income receipts and payments: Income earned by South Africans living in other parts of the
world. Rent on property, interest on capital, and investment profits are some examples.
,LECTURE NOTES - WEEK 1
→ Trade deficit: Imports Exports
→ Trade surplus: Imports Exports
→ Current account Net foreign investment
Current account surplus:
→ A country's foreign assets are growing faster than its foreign liabilities
→ Net foreign investment is positive
→ Net lender to Rest of the World (RoW)
→ Stimulates domestic production and income
Current account deficit:
→ A country's foreign liabilities are growing faster than its foreign assets
→ Net foreign investment is negative
→ Net borrower from Rest of the World (RoW)
→ Dampens domestic production and income
2. Capital Transfer Account
→ Separate item reflecting capital transfers payments (typically non-market, non- produced, or
intangible assets like debt forgiveness, copyrights and trademarks)
3. Financial Account
→ Records all financial asset and liability transactions (flows of financial assets)
→ Three main components: Direct investment, portfolio investment and other investment
→ Direct investment: Includes transactions involving the acquisition of share capital in foreign
countries through the establishment of new businesses or through mergers and takeovers
→ Portfolio investment: The purchase of assets such as stocks or bonds by foreigners and South
Africans in South Africa and abroad
→ Other investment: Includes trade credits, loans, currency and deposits, as well as other assets
and liabilities
Financial account inflow:
→ Foreigners make loans to domestic residents by purchasing domestic assets
→ Because the domestic economy gains money as a result of the transaction, domestic assets
sold to foreigners are a credit (+)
, LECTURE NOTES - WEEK 1
Financial account outflow:
→ Domestic citizens lend to foreigners by acquiring foreign assets
→ Because the domestic economy loses money during the transaction, foreign
assets purchased by domestic citizens are a debit (–)
THE NATIONAL INCOME ACCOUNTS
→ Records the value of national income that results from production and
expenditure
→ Gross Domestic product (GDP) is the value of all final goods and services
produced within a country in a given period
→ Gross national product (GNP) is the value of all final goods and services
produced by a nation’s factors of production in a given time period
→ GDP GNP (factor payments from foreign countries) (factor payments to
foreign countries)
→ Net national product (NNP) GNP (depreciation) (unilateral transfers)
(indirect business taxes)
GNP is calculated by adding the value of expenditure on final goods and services
produced:
→ Consumption: Expenditure by domestic consumers
→ Investment: Expenditure by firms on buildings & equipment
→ Government purchases: Expenditure by governments on goods and services
→ Current account balance (exports minus imports): Net expenditure by
foreigners on domestic goods and services
When production domestic expenditure, exports imports:
→ Current account 0 and trade balance 0
→ When a country exports more than it imports, it earns more income from
exports than it spends on imports
→ Net foreign wealth is increasing
When production domestic expenditure, exports imports:
→ Current account 0 and trade balance 0
→ When a country imports more than it exports, it earns less income from
exports than it spends on imports
→ Net foreign wealth is decreasing
Voordelen van het kopen van samenvattingen bij Stuvia op een rij:
√ Verzekerd van kwaliteit door reviews
Stuvia-klanten hebben meer dan 700.000 samenvattingen beoordeeld. Zo weet je zeker dat je de beste documenten koopt!
Snel en makkelijk kopen
Je betaalt supersnel en eenmalig met iDeal, Bancontact of creditcard voor de samenvatting. Zonder lidmaatschap.
Focus op de essentie
Samenvattingen worden geschreven voor en door anderen. Daarom zijn de samenvattingen altijd betrouwbaar en actueel. Zo kom je snel tot de kern!
Veelgestelde vragen
Wat krijg ik als ik dit document koop?
Je krijgt een PDF, die direct beschikbaar is na je aankoop. Het gekochte document is altijd, overal en oneindig toegankelijk via je profiel.
Tevredenheidsgarantie: hoe werkt dat?
Onze tevredenheidsgarantie zorgt ervoor dat je altijd een studiedocument vindt dat goed bij je past. Je vult een formulier in en onze klantenservice regelt de rest.
Van wie koop ik deze samenvatting?
Stuvia is een marktplaats, je koop dit document dus niet van ons, maar van verkoper jasonalperstein. Stuvia faciliteert de betaling aan de verkoper.
Zit ik meteen vast aan een abonnement?
Nee, je koopt alleen deze samenvatting voor €5,53. Je zit daarna nergens aan vast.
