Invisible trade and tertiary sectors are improving (City, tourism!)
UK dependant M=32% of GDP, X=29%.
Current-2.1b-unreliaable, IPD and transfers volatile, services falling
GDP increases the IT
Imports raw material(inelastic) exports finished good(elastic)
70% to EU. 65-70% with 10 countries(wide)
1. De industrialisation
2. Feedback effects (trading partners might limit import)
3. Inflationary consequences
4. Depression of domestic living standards (surplus could be turned to imported goods)
Cure-inflate, revaluate currency
1. Run on pound
1. Expenditure reducing(domestic deflation). Decrease total demand by fiscal/monetary, used in fixed exchange, with GATT. Causes unemployment.
2. Expenditure switching (import controls, protection, devaluation, elasticities count)
3. capital market - interest rates (expensive, dangerous) and exchange control.
J-Curve-cure BoP by devaluation causes deterioration in SR(no confidence and capacity)