Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can define the balance of payments and name its two accounts. (Guide: “What the balance of payments records”)
- I can list the three parts of the current account and give an example of each. (Guide: “The current account (CA)”; Practice Q1)
- I can explain what the capital and financial account records and what a CFA surplus or deficit means. (Guide: “The capital and financial account (CFA)”; Practice Q3)
- I can explain the difference between the balance of trade and the current account. (Guide: “The current account (CA)”; Practice Q2)
Calculation
- I can decide whether a transaction is a credit or a debit by asking which way the money flows. (Guide: Worked example 2; Practice Q4, Q6(a))
- I can calculate the balance of trade, net income from abroad and net unilateral transfers from data. (Guide: Worked example 1; Practice Q5)
- I can calculate the CA and the CFA, give each its sign, and check that CA + CFA = 0. (Guide: Worked example 1; Practice Q2, Q5)
- I can use CA + CFA = 0 to find a missing value. (Practice Q3, Q7(a)–(b))
Reasoning
- I can explain why total credits equal total debits, so a CA deficit is matched by an equal CFA surplus. (Guide: “Why CA + CFA = 0”; Practice Q7(c))
- I can explain how a change in one account, such as more foreign purchases of domestic assets, is matched by an opposite change in the other. (Guide: Worked example 3; Practice Q6(c))
- I can explain why buying an asset abroad goes in the CFA but the income it earns goes in the CA. (Guide: Worked example 2; Practice Q6(b), Q7(d))
All ticked? Move on to Topic 6.2, Exchange Rates, or return to the course roadmap.