Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Class : Y11 Lesson Topic: Government & Economy Scheme of Work: Balance of Payments

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Lesson Objectives ALL (KNOWLEDGE) Define and describe the terms of balance of trade MOST (ANALYSIS) Examine and Analyse the concepts of the trade balance SOME (EVALUATION ) Evaluate the pros and cons & Justify your views of trade deficits and surpluses. P&D Planning and Planning and Data Higher thinking Skills

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Planning Tools P&D Planning and Planning and Data

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Define and describe the terms of balance of trade [Grade E-D] Examine and Analyse the concepts of the trade balance [Grade C-B] Evaluate the pros and cons & Justify your views of trade deficits and surpluses. [Grade A-A*]

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus KeywordDefinition Balance of payments Balance of trade Exports Imports Invisible trade Visible trade Deficit Surplus CONNECTIVES

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus CONNECTIVES for Analysis CONNECTIVES for Application CONNECTIVES for Evaluation COMPARING Equally… As with… Like… In the same way… Similarly… Even so… Likewise… CAUSE & EFFECT Consequently…Due to… As a result…Therefore.. Because of…Because… CONCLUDING Firstly…After… Secondly…Before… Overall…I believe… Finally…I think … In conclusion…it depends… To conclude…short term… Meanwhile…Long term… CONTRASTING Although…Except… Moreover…If… However…Yet… Apart from…Unless… Despite…As long as… EMPHASISING Most importantly… Significantly… Notably… Especially… Above all… In particular… Indeed… QUALIFYING Despite…Yet… As long as…Unless… Apart from…If… Moreover…Except… However…Although… ADDING In addition…And… Too…Also… Additionally…As well as… Furthermore… ILLUSTRATING For instance…Such as… In the case of…So… For example… As revealed by… As illustrated by…

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Climb the Ladder A-A* 1.To what extent 2.Do you think 3.Evaluate whether (8-10m) 10+ connectives & key words C-B 1.Explain 2.Compare 3.Analyse (5-8m) 5+ connectives & key words E-D 1.Define 2.Describe 3.Identify (2-4m) 2 + connectives & key words ATD Apply to Apply to demonstrate

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Objectives Define balance of payments and explain the relevance of trade Explain current account and identify capital account Causes of a surplus or a deficit on the current account

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Balance of Payments is based on Trade Buying and selling goods and services from other countries The purchase of goods and services from abroad that leads to an outflow of currency from the UK – Imports (M) The sale of goods and services to buyers from other countries leading to an inflow of currency to the UK – Exports (X)

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus The Flow of Currencies: Whisky sold to Italian hotel € changed to £ Export earnings for UK (Credit on Balance of Payments) Map courtesy of

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus The Flow of Currencies: Oil Oil from Russia £ changed into RoublesExport earnings for Russia Import expenditure for the UK (Debit on balance of payments) Map courtesy of

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Exchange Rates S, P, I, C, E, D. A depreciation in exchange rate should lead to a rise in Demand for exports, a fall in demand for imports – the balance of payments should ‘improve’ An appreciation of the exchange rate should lead to a fall in demand for exports and a rise in demand for imports – the balance of payments should get ‘worse’ BUT, exchange rates aren’t fixed therefore don’t reflect the true value of things?

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Exchange Rates and PPP The exchange rate would be a proper reflection of the purchasing power in each country if the relative values bought the same amount of goods in each country. E.g. If the price of McDs in the US was $3.40 and in Europe €5.10, the exchange rate between the two countries should be $1 = €1.50 If EU price was lower than this value, the $ would be undervalued and if any higher, the $ would be overvalued.

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Big Mac Index and PPP 4/burgernomics-and-the-big-mac- index/ If a Big Mac costs $3.41 in the United States, how much are they in the rest of the world? The most inexpensive = China $1.45. Most expensive = Switzerland $5.20. PPP says a Big Mac should cost $3.41 in all countries if measured by dollars. However, that’s not the case because currencies fluctuate in value, so are more expensive (overvalued) or inexpensive (undervalued). Also, the cost of living is different in countries and price of McDs reflects that. If a McD is 50% more expensive in Australia, then your income would probably be 50% more as well.

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus What is the Balance of Payments? Is a measurement of a country’s dealings with the World. 2 elements: Current Account and Capital Account The Current account includes: – (a) Trade in Goods – (b) Trade in Services – (c) Net Flow of Investment Income – (d) Transfers of Money

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Trade in Goods Consumer durables – Household goods – Motor vehicles – Personal computers Capital goods / technology /software Commodities (including oil and other fuels) Components & basic raw materials Foodstuffs and Beverages

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Trade balance in goods

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus UK balance of trade in oil

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus After goods and services comes.. Net investment (+) – Interest payments and profits from external assets locates outside UK Transfer of money (-) – Between governments (e.g. UK funds IMF) – EU funding

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Draw the Balance of Payments For UK

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus The Balance of Payments A record of the trade between the UK and the rest of the world. Trade in goods Trade in services Income flows = Current Account Transfer of funds and sale of assets and liabilities = Capital Account

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Balance of Payments The UK Balance of Payments on Current Account Source: ONS ( (Crown copyright material is reproduced with the permission of the Controller of HMSO and the Queen's Printer for Scotland.)

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus PLENARY

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Climb the Ladder A-A* 1.To what extent 2.Do you think 3.Evaluate whether (8-10m) 10+ connectives & key words C-B 1.Explain 2.Compare 3.Analyse (5-8m) 5+ connectives & key words E-D 1.Define 2.Describe 3.Identify (2-4m) 2 + connectives & key words ATD Apply to Apply to demonstrate

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Pass the Parcel Add as much information you can remember from today’s lesson When the horn blows – pass your sheet to the next table! R Review the Learning Review the Learning

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Neighbours 2 things your neighbour has learnt today 1 question your neighbour wants to ask R Review the Learning Review the Learning

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus Summarise your learning today into a single tweet 140 characters Keep all of the information Tweet STOP R Review the Learning Review the Learning

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus 1 question you need to ask 2 new things you learnt 3 pieces of information R Review the Learning Review the Learning

Economics Section: Chp 35Further Reading Keywords – balance of trade, imports, exports, visible trade, invisible trade, deficits, surplus 5 minutes... GO STOP