'Describe the relationship between the two components of the Balance of Payments'

The Balance of Payments is a summarized recording of all transactions amongst Australia and the rest of the world of a given period of time, fundamentally it illustrates the trade and money flows in and out of Australias economy. For ease of designation and analysis, the Balance of Payments is separated into two separate components namely the, rate of flow Account and the Capital and Financial account which deal independently with certain aspects of Australias international public and private sector interactions. Resulting trends as a consequence of the calculation and analysis of the Balance of Payments much(prenominal) as the Current Account Deficit and the Terms of mass incur significant economic issues both in Australia and their make can have profound impact on the Australian economy abroad and as a result become a great priority for the Government.

The Current Account is a section of the Balance of Payments which summarises all international transactions involving goods, work, income (i.e. engage and dividends) and current transfers. Components of the Current Account include the goods balance, which is the difference among the value of exports and the value of imports (X-M) resulting in either a plain or deficit and the services balance which is the balance of services exports and imports.



Other components of the Current Account include the income balance which atomic number 18 the profits get by Australian companys overseas and dividends earned by Australian investors overseas minus the same payments make overseas and also Current transfers which are funds brought into Australia by immigrants, funds taken out of Australian by emigrants and gifts and donations to and from Australians from and to overseas. The append of the Current Account section of the Balance of Payments is the net score of Goods and services plus net income plus goods and services.

The Capital and Financial...

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