Aims and Objectives Aim Understand the UK current account Objectives D efine UK current account Analyse the UKs import and export destinations Evaluate the importance of the UK current account ID: 424711
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Slide1
Trade – A2 EconomicsSlide2
Aims and Objectives
Aim:
Understand the UK current account
Objectives:
• Define UK current account Analyse the UK’s import and export destinations Evaluate the importance of the UK current account Slide3
UK Current Account
Measures the flow of income into and out of the economy. Four main parts:
Balance of trade in goods
Balance of trade in services
Income Balance – income earned on assets overseas minus income earned from foreign owned assets in UK.Net Transfers – foreign aid, transfer to EU budgetSlide4
UK Current Account 2008
£m
Export of goods
251,102
Import of goods343,979
Export of services
170,399
Import of services
115,920
Balance of trade
in goods and services
-38,398
Income Balance26,940Net Transfers-13,610Slide5
Top 10 UK Export Destinations 2008Slide6
Top 10 UK Import Sources 2008Slide7
Top 10 UK Exports by Commodity 2008 (£m)Slide8
Top 10 UK Imports by Commodity 2008 (£m)Slide9
Trade in Goods and Services 2010Slide10
Current Account Balance 2010Slide11
Current Account Analysis – General Observations
Fluctuations tend to be counter-cyclical, they follow opposite course of business cycle.
Because….
During a recovery demand for M will increase due as domestic capacity is constrained, whilst domestic firms concentrate on booming home markets.
Strong GDP growth between 1997-2007 accounted for deficit as UK consumers incomes grew, imported more.Opposite true in downturn.Slide12
1996-1998
CAB improved
Due to rapid growth of overseas markets such as the US which led to a surge in investment income in 1998 and exports of services.Slide13
1999-2003
Investment income declined following Asian crisis and the rise in the value of the £.
Between 2001-2003 global economic growth slowed and the value of £ remained strong.
Current account remained in deficit, however narrowed due to income surplus.Slide14
2004-2006
Balance worsened
The increase in the value of £ against the $ was the main reason the deficit was so highSlide15
2007-2008
Deficit narrowed by £6.1bn in 2007 and £12.6bn in 2008.
Trade in services and income outweighed deficit in trade of goods.Slide16
Evaluation: Does the current account deficit matter?
Read the Article.
What does the current account deficit mean for the UK economy? Does it matter?Slide17
Plenary
Discuss whether you feel trade with developing countries is necessary for the UK economy to grow.