The difference between the current, capital and financial accounts on the balance of payments
Every country records all its money flows with the rest of the world in a document called the balance of payments. This document splits those flows into three accounts: the current account, the capital account, and the financial account.
Formula
Current Account + Capital Account + Financial Account = 0 (in theory)
Real World
The UK runs a persistent current account deficit (importing more goods and services than it exports) but offsets this through its financial account, as foreign investors buy UK assets like government bonds.
Exam Focus
In data-response questions, read axis labels carefully — a widening deficit means the negative figure is getting larger in absolute terms.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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