External Balance Flashcards

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What is external balance?

When the UK’s trade and income with the world is stable. The goal is no large current account deficit or surplus.

It records all money flows between the UK and other countries. It shows money in and money out.

The part of the balance of payments for trade and income. It includes goods, services, primary income, and secondary income.

When money going out on the current account is bigger than money coming in.

When money coming in on the current account is bigger than money going out.

Goods are physical items like cars and food. Services are things like banking, tourism, and insurance.

Primary income is earnings from investments and work abroad. Secondary income is transfers like gifts, aid, and pensions.

High import spending and weak UK competitiveness. A strong pound can also cause it.

It may need borrowing from abroad. It can put downward pressure on the pound.

UK exports become cheaper and imports more expensive. This can cut the deficit.

Improve productivity to lower costs and boost exports. For example, better skills or transport.

Exports minus imports. If it rises, demand for UK output increases.