How to analyse a country's BOP?

Question

Hey there,

Been given a task ahead of taking AS Economics next year, of writing a report on the UK's economy over the last 10-15 years. I've covered most suggested areas, but a bit stuck when coming to the BOP.

I have a definition of the Balance of Payments, and a graph, but I'm unsure how to analyse the graph's results - as I haven't learnt any Economics yet.

This is the graph: http://news.bbc.co.uk/nol/shared/spl/hi/pop_ups/05/business_uk_economy_plc/img/7.jpg

Just wondering if anyone can tell me an ideal BOP would be, what above or below this means for a country. What does an increase/decrease mean? General info needed to analyse the graph.

Many Thanks

Answer 1

Balance of payments is the balance sheet showing all the money flows in and out of the country.

it has two accounts

Current A/C (all goods & services):

a.   Visible imports and exports of goods  or

balance of trade.

b.  Invisible imports and expports, services.

c.   Incomes & current transfer.

Capital and financial account

representing all the payments and recipts for aquiring fixed assets or investments

generally exports should be equal or more than imports and this would create a positive surplus in the current account which is good

if there is a current account deficit its not good

and you may compare the situation of uk's balance of payments and current account surplus/deficit search at goole "list of countries current account" wiki and you will get a list so that you can compare where uk stands

i hope i have cleared some