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TIPS & EXPERT ADVICE ON ESSAYS, PAPERS & COLLEGE APPLICATIONS

A
balance of payment is a statement that summarizes an economy’s transaction with
the rest of the world for a specified time period. A country’s balance of
payments tells you whether it saves enough to pay for its imports. A balance of
payment deficit is defined as a situation in which the imports of goods and
services exceeds the exports of goods and services. Balance of payments helps
economist and analyst understand the strength of a country’s economy in
relation to other countries. Balance of payments Surplus is the amount by which
the money coming into the country is more than the money going out in a
particular period of time.  (X=M)

Balance
of Trade is the difference between a country’s imports and exports for a given
time period. The use of Balance of trade is a statistical tool to help
economist understand a countries strength against another country

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Irelands Recent Balance Of
Payment

CSO statistical release, 15
September 2017, 11am

Balance of International Payments

Quarter 2
2017

 

 

 

€ million

Merchandise Balance

Invisibles Balance

Current Account Balance

Current Account Balance as % of GDP

Q2 2017

23,360

-24,232

-872

-1.2

Q2 2016

24,977

-26,630

-1,653

-2.5

Q1-Q2
2017

49,159

-41,462

7,698

2.8

Q1-Q2
2016

51,641

-45,962

5,679

2.2

 

Current
Account & Sub-Components

A.  Current Account

1.   Merchandise
Trade

a)   Visible
trade

b)   Visible
Imports

 

2.   Invisible
Trade

a)   Invisible
exports

b)   Invisible
Imports

 

3.   Other
flows

a)   Investment
income

b)   Unrequited
transfers

 

B.  Capital Account

a)   Long
term capital transaction

b)   Short
term capital transaction

 

C.  Balancing Item

Net
Errors and Omission

A current account records a
nations transaction with the rest of the world specifically its net trade in
good and services over a defined period such as a year or a quarter. A
country’s current account balance may be surplus (positive) or deficit
(negative) but will always balance. Current account surplus is spending less
than you earn

          Visible Exports- this
is the exchange of physically tangible goods between countries, this is also
known as goods sold to a foreign country or countries.

Visible Import- these
are goods, rather than services, that are brought into a country to be sold.

Visible Trade Balance (Balance of Trade)- this
refers to international trade in tangible goods but not trade in intangible
goods.

Invisible Exports- these
are services (intangible goods) sold to a foreign country.

Current Transfer (NET)- this
includes all transfers that do not have the following characteristics of
capital transfers:

1.   Transfers
of possession of fixed assets.

2.   Transfers
of funds linked to acquisition or disposal of fixed assets.

Current assets are classified
into two main groups- general government
and other sectors:

General
Government transfers include:

1.  
Cash or kind backed by international
cooperation between governments of different economies.

2.  
Cash transfers between governments for
financing current expenditures.

3.  
Current tax on income and wealth and other transfers
such as social security.

Other
Sectors transfers include:

1.  
Transfers in cash and kind for disaster relief

2.  
Regular contributions to charities, religious
and scientific organizations.

A balance sheet should always
balance. Balance sheet is based on the fact that assets will equal liabilities
and equity every time. Balancing items is an accounting concept found by deducting
the total value of the entries on one side of an account from the total value
of entries on the other side. The assets on the balance sheet contains  valuable things that a company owns or will
get in the future

CSO statistical
release, 27 October 2017, 11am

Foreign Direct Investment

2016

 

 

€ million

 

2015

2016

Foreign
Direct Investment

 

Flows –
Abroad

151,776

26,563

Flows –
In Ireland

194,567

13,129

Positions
– Abroad – end year

835,530

798,787

Positions
– In Ireland – end year

815,831

799,669

Positions
– Net – end year

19,699

-882

Net
Income Flows

-47,727

-39,913

 

Economic reserve is the part
of the shareholders equity except for basic share capital. Reserve are profits
that have been appropriated for particular purpose, they are sometimes set up
to purchase fixed assets. A capital is a type of account on a city’s or
corporation’s balance sheet that is reserved for a long-term capital investment.

 

Problems
Caused By Current Account Deficit

1.  
Lower aggregate demand- the biggest component
of a current account is the trade balance, so if a country has current account
deficit then they probably have a negative trade balance.

2.  
A current account deficit may imply that the
government is replying on consumer spending, and are becoming uncompetitive.

3.  
 A
balance of payments deficit may cause a loss of confidence by foreign investors.
Therefore, there is a risk, which may cause investors to remove investments
causing a huge fall in value of the country’s currency.

Policies that can address long
term current account involves:

1.  
Currency
Weakness- Depreciation in exchange rate might make exports more competitive
and become cheaper to foreigners, which will increase demand for exports. This could
also cause higher economic causing an increase in aggregate demand.

2.  
Income
Leakage – This is the situation where capital or income leaves an
economy rather than remaining within. This also refers to the outflow from
circular flow of income.

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