AP®︎ Macroeconomics: Topic 6.1 Flashcards

Master key terms and definitions for Topic 6.1 of AP Macroeconomics – Balance of Payments Accounts to help you prep for quizzes and the AP exam.

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Term

Balance Of Payments (BOP)

Definition

An accounting record of all international transactions, equal to the current account plus the capital and financial account.

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Balance Of Payments (BOP)
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An accounting record of all international transactions, equal to the current account plus the capital and financial account.

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Capital And Financial Account (CFA)
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Records capital transfers and cross-border purchases and sales of financial and real assets.

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Net Income From Abroad
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Interest, dividends, and other income received from foreign investments minus payments to foreign investors.

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Net Unilateral Transfers
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One-way payments such as foreign aid, remittances, or grants received minus those sent abroad.

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Current Account Surplus And Deficit
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A surplus means total current-account credits exceed debits; a deficit means debits exceed credits.

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Credit And Debit In The BOP
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Money flowing into a country is a credit; money flowing out is a debit.

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BOP Accounting Identity
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Credits equal debits, so the current account plus the capital and financial account equals zero.

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Calculating CA, CFA, And BOP
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Add each account's components, then use CA plus CFA to find the overall balance.

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Current Account (CA)
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Records net exports, net income from abroad, and net unilateral transfers.

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Net Exports / Balance Of Trade
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Exports minus imports of goods and services; positive is surplus, negative is deficit.

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Capital And Financial Account Surplus And Deficit
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A surplus means financial capital inflow; a deficit means financial capital outflow.

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