Level: SL and HL. Sections marked HL only are for Higher Level students.
The balance of payments records every transaction between a country's residents and the rest of the world. This topic explains its structure, how its accounts are linked and (HL) what persistent imbalances mean and how they can be corrected.
4.6.1 The meaning of the balance of payments
Definition
The balance of payments (BoP) is a record of all transactions between the residents of a country and the rest of the world over a period of time, usually a year.
- Credits (+) are transactions that bring money into the country, such as export earnings, income received from abroad and investment inflows.
- Debits (−) are transactions that send money out of the country, such as import spending, income paid abroad and investment outflows.
🔒 Also in the full notes
- 4.6.2 The components of the balance of payments
- 4.6.3 The relationship between the accounts
- 4.6.4 The current account, the financial account and the exchange rate (HL only)
- 4.6.5 Implications of persistent current account deficits (HL only)
- 4.6.6 Implications of persistent current account surpluses (HL only)
- 4.6.7 Methods to correct a persistent current account deficit (HL only)
- 4.6.8 The Marshall–Lerner condition and the J-curve (HL only)
- Exam practice: 5 questions with mark allocations
- 2 exemplar answers with full model answers and examiner commentary
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