Preview
Preview

Essay about Improving a Deficit in the Balance of Payments

No Works Cited
Length: 978 words (2.8 double-spaced pages)
Rating: Purple      
Open Document
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Discuss the alternative policies a government may use to improve a
deficit in the Balance of Payments (BOP)

There are many ways a government can improve a deficit of the BOP.
First we must define the key terms. A deficit is the falling short of
revenue as compared with expenditure; the amount of this deficiency;
the amount required to make assets balance liabilities.

The Balance of payments is a record or overall statement of a
country’s economic transactions with the rest of the world, usually
over a year.

Now it is clear what the question means it is important to understand
what causes a deficit in the BOP. There is often a tendency for UK
consumers to buy foreign output goods leading to an increase in the
amount of imports coming into the county. Often the domestic market
cannot cope with the demand so imports are made to satisfy demand.
Some UK firms have high non-competitive prices so foreign goods are
preferred. Also the quality, designs reliability and after sales
service are important. Declining comparative advantages in many areas
– the advantages are that countries have in producing certain goods
and services change over time as technology alters and other countries
exploit their economic resources and develop competing industries. UK
manufacturing industry has suffered over the years from the emergence
of low cost production in newly industrialised areas such as South
Korea and other parts of Europe.

A controversial opinion is that the overvalued exchange rates mean
that UK exports are very high but imports are relatively cheap.
Foreign consumers are inevitably not going to buy as much British
goods. What’s more, as the imports are cheaper British people buy
foreign goods. The UK used to be a major exporter of oil from the
North Sea fields. Finally this market is now past its peak and doesn’t
contribute much to the BOP.

Protectionist methods are designed to make sure that domestic produce
can compete with international produce so that there is a better
balance of imports and exports.

First of all quotas; this affects the supply of imports. You make
barriers on supply prices higher than normal. With quotas the higher
prices will mean that foreign firms make higher profits. Quotas can be
in terms of volume or value permitted. Sometimes the domestic
government sells licenses to foreign firms they in t...


... middle of paper ...


...eed to protect it and can trade
on the international stage. The drawback of this is that the industry
will never reach full efficiency because it’s free of the disciplines
of foreign competition.

It also protects against dumping this is when the sale of a good is
below the cost of production. In the short-term consumer’s benefit
from low prices of foreign goods, however in the long - term domestic
businesses will go out of business resulting in the foreign firm
having the monopoly over the market. The consequence of this will be
that they can then charge what they like.

Another important factor is externalities and import controls.
Protecting de – merit goods such as alcohol, tobacco and narcotic
drugs. By imposing high tariff barriers on these or just banning them
it can safeguard society.

There are also non-economic reasons a country may not want to
specialise because if the market declines or there is a better
competitor then there will be mass unemployment. Domestic employment
is key government objectives so by protecting industry you are
ensuring jobs. Protection may be for political reasons, for instance
the UK does not trade with Nigeria and Iraq.


Click the button above to view the complete essay, speech, term paper, or research paper








This essay is 100% guaranteed.


Title Length Color Rating  
Essay on Budget Deficit, Fiscal Stimuli and the Economic Recovery - Budget deficit, fiscal stimuli and the economic recovery Post budget debate is heating around the points if the economy is heading in the right direction and government has the capacity to deal with major economic challenges. It is true that the economy of Pakistan is passing through a critical stage and major road blockers to growth seem to be increasing unemployment rate, inflation rate, incidents of terrorism as a consequence falling foreign and local investment levels, and power shortage. Adding to the injury, the country is included in the list of top 5 most unstable countries, along with Iraq and Afghanistan, of the world....   [tags: Economics] 1100 words
(3.1 pages)
Strong Essays [preview]
The International Monetary Fund and Balance of Payments Essay example - Purchases of products and services are not always restricted within the borders of a single country. As consumers in one country transact with businesses in other countries, the balance of payments (BOP) keeps a record of the exchanges (Eiteman, Stonehill, & Moffett, 2010). For example, a purchase made in the United States (U.S.) for Chinese-made goods would be considered an export to China and an import to the U.S. even if it is purchased by a consumer in his hometown. In order to complete this transaction, an exchange of goods, services, or money between the U.S....   [tags: products, services, purchases]
:: 9 Works Cited
1650 words
(4.7 pages)
Term Papers [preview]
The Factors that Would Lead to an Increase in the Size of the Deficit on the Current Account of the Balance of Payments - The Factors that Would Lead to an Increase in the Size of the Deficit on the Current Account of the Balance of Payments The current Account is a key indictor for the British economy. It is the sum of four separate trade balances between the UK and the Rest of the World. The Current Account records the exports and imports of both visible invisible items. Therefore a deficit on the Current Account occurs when we was a country are either importing too many goods and services from abroad, or are not exporting enough, usually it is a mixture of both....   [tags: Papers] 842 words
(2.4 pages)
Strong Essays [preview]
Essay about Trade Balance in Foreign Countries - ... This caused a collapse of the Indian rupee in the summer of 2013. Government intervention: A wide range of measures is in place to stabilize economy and reduce the gap between rich and poor. These measures are: • Fiscal measures: To reduce the fiscal and revenue deficit the government of India has a strong control over its own expenditure. In 1984, the government announced a package program to curtail public expenditure and to postpone fresh recruitments to government jobs. • Monetary measures: The monetary policy of RBI consists of extensive use of general and selective control credit....   [tags: deficit, exports, employment] 977 words
(2.8 pages)
Research Papers [preview]
Essay on The Swedish Banking Crisis - One of the largest shifts in Sweden’s trade balance occurred from 1990 to 1991. During this time period, there was a seven and a half billion dollar shift. In 1990 the overall Balance of Payments (BoP) was a 7.552 billion dollar surplus and by 1991 it had become a 63 million dollar deficit. The cause of this major shift in Sweden’s trade balance is what I’d like to explore. The Balance of Payments consists of the current account and the financial account. This suggests that the seven and a half billion dollar shift in the trade balance occurred in both of these accounts....   [tags: Trade Balance, Balance of Payments]
:: 4 Works Cited
927 words
(2.6 pages)
Better Essays [preview]
Deficit Spending Must Stop Essay - “Today I'm pledging to cut the deficit we inherited by half by the end of my first term in office" (Obama). This is the promise of President Barack Obama shortly after being elected to his first term in office as president. Currently, however, the United States (US) government is in a difficult situation concerning the national debt accumulation and the main problem of a continuously unbalanced budget producing this massive debt. The national debt is currently at $16.8 trillion and is ever climbing....   [tags: US Federal Deficit Spending]
:: 11 Works Cited
2606 words
(7.4 pages)
Strong Essays [preview]
Essay on The Theory and Implementations of The Balance of Payments (BOP) - The Theory and Implementations of The Balance of Payments (BOP) To develop country’s economic strength under the tendency of globalization, governments always seek to achieve two macroeconomic objectives, i.e. stable growth of internal economy and balanced development of external economic activities. The former can be realized by effectively adjusting Economic Growth, Unemployment and Inflation. However, how to realize the latter. An external macroeconomic variable is needed. In practice, the Balance of Payments fulfills this responsibility....   [tags: Economics]
:: 10 Works Cited
2136 words
(6.1 pages)
Strong Essays [preview]
Balance of Payment in Africa Essay - Balance of payment deficit is an imbalance in a nation’s balance of payments in which payments made by the country exceeds payments received by the country. It’s also known as unfavourable balance of payment because more currency is flowing out then currency flowing in to the country. Unequal flow of currency will reduce supply of money in the nation and has implications for inflation, unemployment, production, and other factors of domestic economy (political, social, cultural and economic factors)....   [tags: Economy, Finance]
:: 7 Works Cited
1751 words
(5 pages)
Powerful Essays [preview]
An Explanation of the British's Stuggles to Finance the War with Napoleonic France in The British Balance of Payments - ... He relies mainly on figures derived from Walter Nash and Albert H. Imlah, both of which are Economic British Historians. The author then begins to advance each line according to their own specific histories. For instance he takes into account the raise of tariffs on certain products such as tobacco that would affect the quantity of illegal imports, thus affecting the real credit value. The author also goes into great detail to compensate for the stated inaccuracies of some numbers, by showing how numbers counter-balance one another to give an accurate final account of net credits....   [tags: economy, industrialization, debt]
:: 1 Works Cited
1081 words
(3.1 pages)
Better Essays [preview]
Argentina's Complete Balance Of Payment Essay - Case Study Objectives: • Preparation of Argentina’s complete balance of payment for the previous year and a forecast for next year. • Effects of devaluation on sales if it occurs in Argentina’s economy. • Borrowing decision feasibility for M/s Jeans USA Findings: Trade balance is in a healthy position $4.691 BN and is likely to increase Exports are $12.078 BN and are expected to increase to $13 BN which is 8% for next year. Imports are likely to be remain constant Foreign reserves are $10 BN Business prospects are excellent in Argentina BALANCE OF PAYMENTS Current Account | |$ in billions | |Expor...   [tags: Budget Finance Argentina] 1860 words
(5.3 pages)
Strong Essays [preview]