Questions and Answers
What does the balance of payments of a country measure?
The difference between money flowing into and out of the country
Which components make up the balance of payments?
The current account and the capital account
What does the current account of the balance of payments reflect?
A country's net income
What was the dominant economic theory influencing European rulers in the 16th century?
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What does the capital account of the balance of payments reflect?
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What is the balance of payments?
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What does the current account of the balance of payments reflect?
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What does the capital account of the balance of payments reflect?
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What was the dominant economic theory influencing European rulers in the 16th century?
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What did European rulers replace local trade regulations with in the 16th century?
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Study Notes
Balance of Payments
- The balance of payments measures the transactions of a country with the rest of the world.
- It is composed of two main components:
- Current Account
- Capital Account
Current Account
- Reflects a country's trade in goods and services, income, and unilateral transfers.
- Includes exports and imports of goods and services, income from abroad, and unilateral transfers such as foreign aid.
Capital Account
- Reflects the capital transactions of a country, including foreign investment, loans, and changes in official reserves.
Economic Theory
- The dominant economic theory influencing European rulers in the 16th century was Mercantilism.
- European rulers replaced local trade regulations with Mercantilist policies in the 16th century, aiming to maximize their nation's wealth and power.
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