Syllabus: OCR - GCSE Economics
Module: 4. International Trade and the Global Economy
Lesson: 4.2 Balance of Payments
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Introduction
The OCR GCSE Economics module 4.2, Balance of payments, sits within the broader topic of “International trade and the global economy.” This lesson supports learners in understanding how a country’s economic relationships with the rest of the world are tracked and interpreted. By aligning directly with the OCR J205 specification, this content develops key analytical and evaluative skills, and links to broader macroeconomic objectives like economic growth and exchange rates.
This topic doesn’t just tick a box for exam coverage — it connects economics to students’ everyday lives, from the cost of their mobile phone to the availability of jobs in a globalised market. Understanding the balance of payments helps students grasp the wider consequences of decisions made by governments and global firms.
Key Concepts
OCR expects learners to cover the following within this section:
Definition of the balance of payments: An accounting record of all monetary transactions between a country and the rest of the world over a period.
Current account: Focus on trade in goods and services, investment income, and current transfers.
Surpluses and deficits: What these mean in practical terms and how they affect a country’s economy.
Causes of deficits and surpluses: Exchange rates, competitiveness, inflation, income levels.
Consequences: Impact on growth, employment, exchange rates and living standards.
Government policy responses: Demand-side (fiscal/monetary) and supply-side approaches to correct imbalances.
Students should be able to explain, analyse, and evaluate each of these concepts in applied contexts.
Real-World Relevance
The UK’s current account has consistently shown a deficit in recent years. Students can explore why the UK imports more than it exports, and what that means in terms of competitiveness or reliance on foreign investment.
Mini case study: Brexit and the UK balance of payments
Following the UK’s departure from the EU, there were significant changes in trade flows. Exporters faced new frictions, affecting the balance of goods, while services exports (like financial and legal services) saw shifts due to new barriers and uncertainty. This provides a rich context for class discussion around real data and lived consequences.
Other useful angles:
Tourism surges and declines (e.g., COVID-19’s effect on the travel services component)
Oil prices and their impact on trade balances for net exporters vs importers
How It’s Assessed
OCR uses a mix of command words that map to increasing levels of cognitive demand:
Explain: Define and expand with an example.
Analyse: Develop a logical chain of reasoning, e.g., how a trade deficit affects exchange rates.
Evaluate: Weigh up arguments, present alternatives, and offer judgements.
Assessment formats include:
Short-form questions requiring definitions or simple explanations.
Longer data-response questions often anchored in stimulus material (e.g., a table of trade figures).
Extended responses where students argue the merits of different government responses to trade imbalances.
Encourage students to practise building arguments with diagrams and to link causes to consequences clearly.
Enterprise Skills Integration
The balance of payments isn’t just theory — it’s decision-making in action. Key enterprise and employability skills embedded here include:
Problem-solving: What can be done about a persistent trade deficit?
Decision-making: Choosing between fiscal tightening or supply-side reform.
Numeracy and interpretation: Making sense of trade and capital flow data.
Critical thinking: Judging the effectiveness of government policies on current account imbalances.
Enterprise Skills’ Business Simulations plug directly into these topics by letting students act as economic advisors or business managers, adjusting prices and exports/imports in simulated markets.
Careers Links
Understanding global trade builds pathways to careers such as:
Economist or Policy Analyst
International Trade Advisor
Investment Analyst
Business Development Manager (especially in export-driven sectors)
Diplomatic Service Economist
These roles align with Gatsby Benchmark 4 (linking curriculum learning to careers) and Benchmark 5 (encounters with employers). Our simulations can simulate workplace-style decision-making and discussion, even within the classroom.
Teaching Notes
What works in real classrooms:
Use real trade data from the ONS to make charts and comparisons.
Set up a role-play debate: Should the UK government intervene to reduce the trade deficit?
Use scaffolding diagrams: flow charts of the current account’s components.
Apply the PEEL structure for long answers: Point, Evidence, Explanation, Link to question.
Common pitfalls:
Confusing current account deficits with budget deficits.
Over-simplifying causation (e.g., assuming imports are bad or exports always good).
Misinterpreting the significance of investment flows and capital accounts.
Extension ideas:
Compare the UK with a surplus economy like Germany or China.
Explore how developing economies manage their balance of payments.
Analyse the implications of trade sanctions or currency manipulation.
