Impact on BOP! (1 Viewer)

[mushroom_head]

i am so confused with this whole BOP thing.

Can someone please tell me how Australia's foreign debt and foreign liabilities can impact on trends in the BOP?
by the way, what's the difference b/w debt and liability?
What exactly are the trends? are they like the statistics in the BOP or something???
i'm so lost in eco ...!

 

[ashwin]

Originally posted by mushroom_head
i am so confused with this whole BOP thing.

Can someone please tell me how Australia's foreign debt and foreign liabilities can impact on trends in the BOP?
by the way, what's the difference b/w debt and liability?
What exactly are the trends? are they like the statistics in the BOP or something???
i'm so lost in eco ...!

BOP is easy dude. ok, firstly:

increase in foreign debt --> increase amount of debt in form of interest payments --> increase net income deficit --> increase CAD.

there u go, easy as that, next:

trends in BOP is basically what the CAD has been doin over the last decade, what the various components of the CAD have been doin (eg. good balance has been fluctuating), and then same thing for KAS. next:

net foreign liabilities include debt and equity, wheres as net foreign debt only includes debt.

thats a very vague explaination, if it doesnt make sense, ill pm u a better explaination.

if ur really having trouble, i do offer eco tuition. my mark was 94.

 

[aditya]

Firstly, ashwin if u got a mad answer post it here , so everyone can see it

hehe

this place is good for revising hehe.. answering peoples questions.... so taking nothing away from u....

net foreign liabilites = net forgien debt (what we owe foriegners) minus net forieng equity (what forigners owe us)

without confusing - If net foreign debt is high then debt servicing (interest costs, use those economic terms ) will be high. This interest expense is recorded in the CURRECNT ACOUNT, under income... this is a VERY comon multiple choice question...

Anyway, the net income accounts for the majority of Australia's CAD... research trends in the australian dolllar urself, as this affects the foriegn debt, as foreign debt is calcluated in terms of another currency (usually). So if the dollar rises, our foreign debt will decrease as our dollar buys mroe of that currency, hence less dollars are owed in paying for the same amount... if dollar is high, foreign debt will be low, interest expense will be low, hence an improvement in our CAD...

isnt it just so interesting??/

things that annoy me are that the affects go on.. more or less never ending... but that can be helpful, try to make stories... check out www.creativeclassroom.com.au, either buy their products or make up ur own....

have fun

 

[mushroom_head]

Originally posted by aditya

without confusing - If net foreign debt is high then debt servicing (interest costs, use those economic terms ) will be high. This interest expense is recorded in the CURRECNT ACOUNT, under income... this is a VERY comon multiple choice question...

how come this interest expense is recorded under income in the current account? why is it income when we are paying interest?

 

[olay]

Originally posted by mushroom_head
how come this interest expense is recorded under income in the current account? why is it income when we are paying interest?

its NET income....... i.e. payments to australia minus payments Overseas.

and its in the current account b/c the flow is "tangibly" present....if u get what i mean? like... ok say i'm japan and you're australia. i'm paying you cash. that'd go in the current account cause you have the dosh then and there ready to spend.
whereas the stuf that goes into the capital and financial account is stuf that is put into something for an expected return.

hey wait i just went through my stuf and something that explains ^^^ better. it goes in the current account because what you're paying is "Real value" - i.e. what you pay is what they get. the stuf that goes into the capital and financial acc. is not real value because what they have spent is not what they're gonna get back [b/c of factor incomes e.g. interest, profit].

 

[mushroom_head]

ohhh i get it! So what goes in the CA is a definite amount whereas what goes in the current and financial acccount can change depending on profits?!

And! because we are servicing debt, there's an improvement in the CAD so that's why it's income???

am i getting this right?