Introduction to the Balance of Payments (Online Lesson)

This online lesson provides an overview of the structure of the Balance of Payments and its main accounts / features.

WHAT YOU'LL STUDY IN THIS ONLINE LESSON

• the meaning of the Balance of Payments
• the nature of each of the current account, financial account and the capital account
• an overview of the UK's position on the Balance of Payments

Additional teacher guidance is available at the end of this lesson. Thank you to Cathy Williams and Jon Clark for their contributions to this lesson.

HOW TO USE THIS ONLINE LESSON

Follow along in order of the activities shown below. Some are interactive game-based activities, designed to test your understanding and application of the balance of payments. Others are based on short videos, including activities for you to think about and try at home, as well as some extra worksheet-based activities.

If you would like to download a simple PDF worksheet to accompany the video activities, you can find it here. You can print it off and annotate it for your own notes, or make your own notes on a separate piece of paper to add to your school/college file.

ACTIVITY 1: GAME - KEY TERMS

Get yourself warmed up by reviewing some key terms that are important for international economics!

ACTIVITY 2: VIDEO - OVERVIEW

This first introductory video provides you with an overview of the Balance of Payments, covering some of the key terms and providing a snapshot of the essential accounts.

ACTIVITY 3: VIDEO - THE CURRENT ACCOUNT

The current account is one of the key accounts on the Balance of Payments, and is the one you are most likely to have already met in Year 12 economics.

ACTIVITY 4: RESEARCH AND THINKING TASK - UK CURRENT ACCOUNT

Get to grips with some real-world data on the UK's current account on the Balance of Payments

• browse the latest information on the UK's balance of payments from the ONS here
• take a look at a summary of the UK's current account over time from Trading Economics here
• Also using the data from Trading Economics, compare and contrast the UK's position with any other country of your choosing by clicking here

Can you present your findings in an interesting and creative way?

ACTIVITY 5: GAME - CURRENCIES AND TRADE

Build your wider awareness of international trade by having a go at this interactive game - how will you get on?

ACTIVITY 6: VIDEO - FINANCIAL ACCOUNT

The Financial Account is a key part of the Balance of Payments, comprising FDI flows, portfolio investment flows, hot money (i.e. short-term capital) flows and foreign currency reserves. Find out more in this video.

ACTIVITY 7: VIDEO - CAPITAL ACCOUNT AND NET ERRORS

The capital account and 'net errors and omissions' form the remaining parts of the Balance of Payments. These are much smaller than the Current Account and Financial Account, but it's worth being aware of them.

ACTIVITY 8: WORKSHEET - TERMS OF TRADE

Remind yourself of the "Terms of Trade" (which can impact on an economy's Balance of Payments position) by downloading this extra worksheet.

ADDITIONAL TEACHER GUIDANCE

This lesson comprises:

• around 30 minutes of guided video content, spread across 4 videos
• around 15-20 minutes of student thinking and activity time throughout the videos
• 2 interactive games, designed to build awareness of real-world economics and application
• an additional task reviewing the Terms of Trade

Follow up this lesson by trying the online lesson on Correcting BOP Imbalances.