2-R Balance of Payments AQA A-level Economics (new spec) MACRO

This is one of a set of Powerpoints (and accompanying Notes/Key Terms sheets) that I have created for my own teaching of the macroeconomic topics in the new (linear) AQA A-level Economics specification (7135). They follow the order of teaching recommended by the exam board and (generally) the AQA-approved textbooks (Powell & Powell, 2015).

Key terms covered in this Powerpoint: (references to the specification):

4.2.6.3 The balance of payments
• The difference between the current, capital and financial accounts on the balance of payments.
• The current account comprises trade in goods, trade in services, primary income and secondary income.
• The meaning of a deficit and a surplus on the current account.
• The factors that influence a country’s current account balance such as productivity, inflation and the exchange rate.
• The consequences of investment flows between countries.
• The policies that might be used to correct a balance of payments deficit or surplus.
• Expenditure-switching and expenditure-reducing policies.
• The effect policies used to correct a deficit or surplus may have upon other macroeconomic policy objectives.
• The significance of deficits and surpluses for an individual economy.
• The implications for the global economy of a major economy or economies with imbalances deciding to take corrective action.
• Students should have a detailed knowledge of the structure of the current account of the balance of payments but only need a general appreciation of the other sections of the balance of payments account.
• Students should appreciate the difference between foreign direct investment (FDI) and portfolio investment.