Posts tagged balance of payments

This can be a difficult concept to understand (especially at IGCSE level, less so at IB level), mainly because we are trying to understand how an entire country manages its financial accounts of all transactions between itself and other countries. The real difficulty, i find, is that different nations take different approaches which means that there is no uniform ‘model’ of what Balance of Payments should be structured. In some cases, different phrases are used for the same thing (always a source of frustration to students when learning something first time round). Text books and online articles (try this and here) have plenty to say about it, but here are a few resources designed to help simplify understanding.

Here is a skeleton outline of the B of P, which is perhaps oversimplified. A student in my class typed notes from my whiteboard scrawl (thanks Jonathan):

This youtube video by pajholden helps understand the Current Account structure from a UK perspective: ‘balance of payments – structure of the current account ‘

Below, this simple interactive drag and drop exercise hosted at www.reffonomics.com is a useful reminder of how different ‘components’ of the Balance of Payments can be classified. Click on the table / image below.

Below, there is another really helpful interactive exercise by Rafael Pampillon hosted at http://openmultimedia.ie.edu to play around with the different components of the Balance of Payments, where they might be placed and how they might be applied. You are advised to read the guide attached to the .swf file (top right hand corner) but even if time does not allow for this, it is good to experiment as the feedback will help you realise the correct answers with a bit of trial and error). Click on the image below to access the page.

Finally, here is a bit more detail from http://tutor2u.net on the topic (better for IB level than IGCSE level):

http://tutor2u.net/economics/revision-notes/as-macro-balance-of-payments.html

balance of payments, international economics

The Economic Health Of A Country

Aug 26th

Posted by James Penstone in Economics

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[License: Some rights reserved by juhansonin]

As we begin to explore macroeconomics, it is worth thinking about some of the key things that we will be looking at and how they apply to a real life country.

Economists agree that there are four main macroeconomic goals which most governments consider when managing their economy (and some governments, as we know, manage their economies more directly than others). The four macroeconomic goals are:

1) Growth (an increase in the country’s total output)

2) Low Unemployment (or put another way, high employment)

3) Stable General Price Level (while it is accepted that a small amount inflation is manageable, both high inflation and deflation are seen to be undesirable).

4) A Healthy Balance of Payments (for example, importing more goods and services than those that a country exports can be seen to be undesirable in the long run).

Sometimes, a fifth macroeconomic goal is added, although we should recognise that it clearly appears to be of variable importance to the different governments of the world:

5) Equity (an even distribution of wealth within the country)

There are other macroeconomic goals that are sometimes considered which you may come across in your research.

A good research task is to consider these macroeconomic goals for a country and gather data on a number of economic indicators for your country. Examples of such indicators include:

GDP and / or GNP
GDP per capita / and or GNP per capita
Rates of Inflation
Interest Rates
Unemployment Levels
Balance of Trade (Imports versus Exports)
Distribution of Wealth

You could choose a country that has signed up to the OECD. What does that stand for, and why would a country want to belong to this organisation?

Look at the economic health for your chosen country over the past ten years. Gather text, images and even video links to support your findings. If you can, try to see why they changes but don’t worry about this too much – this can be complicated and we haven’t even studied the theory yet.

http://www.oecd.org

A great way to present your findings would be to produce a ‘glog’ or online poster. You can host your glogs at http://www.glogster.com/ and teachers can even set up accounts for their class here: http://edu.glogster.com/

Make your glog as informative as possible. Try to mix up text, images, graphs and tables and possible short video clips (from youtube for example). Remember to give a title and explain your chosen country’s membership of the OECD.

balance of payments, economic goals, economic indicators, glog, growth, inflation, OECD, unemployment