The Interest Rate Transmission Mechanism

The Balance of Payments: Imports

Imports are the purchase of goods and services by UK firms from abroad. The purchase of goods and services leads to money flowing out of the UK to pay for these items. Again, the level or volume of imports refers to the physical quantities purchased but the value of imports (the amount spent on imports) is determined by the price of imports x the amount bought. The price paid by importers is dependent on the exchange rate between the pound and the foreign currency concerned.

You can start and stop/reset the animation using the buttons provided or by tabbing to the animation and pressing s to start and q to stop. The main introductory page features further accessibility information on these resources.

The animation would illustrate the import of goods to the UK from the United States. As goods move across the Atlantic, the UK buyer pays for the goods by exchanging pounds for dollars. The animation starts with 20 boxes representing goods in the US and 20 notes representing pounds in the UK. As the sale of goods increases the boxes reduce one by one from the US and stack up in the UK whilst pounds move from the UK, change into dollars and stack up in the UK. The end of the animation occurs when 15 of the 20 boxes have been bought and 15 of the 20 pounds have moved to the US.

Previous: The Balance of Payments: Exports | Index: Interest Rate Index | Next: The Balance of Payments: Putting the Two Together