Balance of payments
Financial and capital account
The secret to scoring awesome grades in economics is to have corresponding awesome notes.
A common pitfall for students is to lose themselves in a sea of notes: personal notes, teacher notes, online notes textbooks, etc... This happens when one has too many sources to revise from! Why not solve this problem by having one reliable source of notes? This is where we can help.
What makes TooLazyToStudy notes different?
are clear and concise and relevant
is set in an engaging template to facilitate memorisation
cover all the important topics in the O level, AS level and A level syllabus
are editable, feel free to make additions or to rephrase sentences in your own words!
Looking for live explanations of these notes? Enrol now for FREE tuition!
The capital account includes, for instance, government debt forgiveness, money brought into and taken out of the country by migrants, the sales and purchases of copyrights, patents and trademarks
The financial account records large movements of funds into and out of the country.
The balance on the financial account is made up of flows of capital to and from the non-government sector, such as
direct investment in overseas facilities
portfolio investment (in shares, bonds, and so on)
speculative flows of currency
Movements on government foreign currency reserves are also included under this heading.
The balance of payments as a whole must always balance. This is because any credit item has to be matched by a corresponding debit item.
In practice, however, with so many transactions involved, it is difficult to keep an accurate record. Some mistakes are likely to be made and some transactions may not be included. To compensate for this, a net errors and omissions figure (also sometimes called the balancing item) is included.