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International economics - Balance of Payments - Coursework Example

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The current balance of payment of United Kingdom is economic transactions noted between the domestic country that is United Kingdom and the rest of the world in a given period of time. It can be a quarter a year, half a year recording or a full year recording. The transactions…
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International economics - Balance of Payments
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"International economics - Balance of Payments"

Download file to see previous pages The transactions of imports and exports done by United Kingdom can be in terms goods, services, financial transfers and financial capital.
According to park if the sovereign payments are greater than autonomous receipts, the balance of payment will at disequilibrium. A country like United Kingdom which is experiencing balance of payment deficits in its current will be required to make up an increasing financial debt so that it posses more foreign assets (Park 2004, p. 122). Basically there are three types of balance of payments deficits. They include visible trade deficit, basic deficit and current account deficit.
There are four in which United Kingdom measures its current account deficit. They include the net current income for example income from overseas investment, the balance of trade in goods, transfer of payments for example payments made to European Union and lastly the balance of trade in goods. The other factors that causes imbalance in balance if payment apart from the fall of value in pound include,
A decrease in the current account is caused by a period of consumption led economic increase or growth. If consumption and consumer spending is increased within the United Kingdom, it will lead automatically to an increased expenditure on imports (Park 2004, p. 31). Given in 2011 and 2010, the domestic economy was experiencing massive growth with an increased consumer spending and inflation. This caused to a large gap of deficit on the current account. Recently recession has led to a temporary improvement in the deficit after most consumer cut back on their spending. A nation with individuals and firms saving lowly with a high percentage of consumption will automatically also have a higher current account deficit hence causing disequilibrium of balance of payment.
The relative competitiveness of industrial production of ...Download file to see next pagesRead More
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