94.

ANSWERS: Balance of payments 3

1. Complete the following table (all figures in £bn)

Trade in Trade in Investment Current Current
Goods Services Income Transfers Account

2013 Q4 -28.87 18.82 -7.73 -7.23 -25.01

2014 Q1 -29.31 19.04 -6.36 -7.04 -23.67
2014 Q2 -30.11 20.89 -8.17 -5.27 -22.66
2014 Q3 -31.9 22.86 -12.59 -4.61 -26.24
Source: ONS March 2015

2. Complete the following Multiple choice questions

1) Which of the following would appear in the current transfers section of the current account?

A. Imports of mobile phones Explain your answer: Current Transfers

B. Sale of insurance services to France include transfers of aid such as

regional assistance from the EU &
C. Purchase of a plane by British Airways membership fees to the EU.
D. EU financial assistance received by British regions.

2) If the UK real interest rate rises what is likely to happen to exports and imports?

Imports Exports Explain your answer: As the real interest rate

A. Rise Fall rises, hot money will flow into the UK
B. Rise Rise and the £ will appreciate, causing X to
C. Fall Fall fall and M to rise.

D. Fall Rise

3) A appreciation of the Pound is likely to result in

Explain your answer: As

the £ appreciates
A. An increase in imports
imports become more competitive
B. A decrease in imports and hence imports will increase.
C. An increase in exports
D. A expansion in Aggregate Demand

4) Which of the following is most likely to cause a decrease in the UK’s balance of payments deficit on the current
account?

A. Increase in the value of the Pound Explain your answer: As productivity increases
the competitiveness of UK goods increases
B. Decrease in income tax and therefore exports increase and the
C. Increase in the rate of inflation demand for imports by domestic firms rises.

D. Increase in the productivity of the workforce

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