The Interest Rate Transmission Mechanism

The Balance of Payments: Neutral

In this next animation, the balance of payments in the UK is depicted by the amount of money spent on imports (import expenditure) and the amount earned from selling exports (export earnings). The animation shows the situation when the balance of payments is neutral - the amount of money earned from selling exports is equal to the amount spent on imports.

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 display two sets of counter values in pounds - one for export earnings, the other for import expenditure for the UK. Goods are represented by different coloured boxes, which flow between the UK and US representing imports and exports. As the goods flow, the counter values begin to rise. The end of the animation shows the level of export earnings at £70 and the level of import expenditure also at £70 to illustrate a neutral balance of payments situation for the UK.

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