39 CURRENT ACCOUNT OF BALANCE OF PAYMENTS, Definitions A current account deficit occurs when a country spends more money than it earns, Le. imports exceed exports. A current account surplus exists if country exports ‘more than it imports, Activity Copy the following table and classify each transaction by using a tick in the correct, column, fram the perspective of the UK economy. Transaction 2 AGerman company purchases UK-produced chemical produe's “American tourists fly tothe UK on British a ee ses UK supermarkets purchase French wine and cheese The UK government maintains foreign embassies overseas aay German tourists buy theatre tickets to see Los Misérables in Landon Tho UK government pays interest on ts borrowing (debtst 'A British firm buys @ fleet of lorries (trucks) fom Japan are : _ Global sales of Harry Potter baoks by Britich | author JK. Ravwling Exam-style question Study the data below and answer the questions that follow. ‘Trade balance for Country 8 (Sbn), 2017 Exports 85 Goods 87 Services 8 Imports Goods 28 Services 15 Visible balance Invisible balance Trade balance 2 Define the term ‘invisible balance’ (a) b Calculate the missing figures in the data above. ia] Current account deficits and surpluses A country is said to have a current account deficit if its import expenditure is greater than its export earnings. Hence, the current account has a negative balance. By contrast a current account surplus exists if the country exports more than it ‘imports. This means the country will have a positive balance on its current account.