Syllabus: SQA - Higher Course Spec Economics
Module: Global Economic Activity
Lesson: Balance of Payments
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Introduction
This topic from the SQA Higher Economics course sits within the “Global Economic Activity” unit and tackles the balance of payments—a core macroeconomic concept with direct ties to global trade and currency fluctuations. Teaching it not only addresses syllabus outcomes but also gives students a sharper understanding of the UK’s economic position in the world.
It’s relevant, examinable, and rich with links to current affairs. For teachers under pressure to make every lesson count, this is one that delivers syllabus coverage, critical thinking, and future-facing skills in one go.
Key Concepts
From the SQA course spec, here’s what students are expected to grasp:
What the balance of payments is: A record of all the UK’s economic transactions with the rest of the world.
Main components:
Current account: Trade in goods and services, income, and current transfers.
Capital and financial account: Investment flows, reserves, and currency transactions.
Trade balance: The difference between the value of exports and imports.
Surplus vs deficit: What these terms mean and why they matter.
Exchange rates: How currency value changes affect the balance of payments.
Impact of global trade: How relationships with developed and developing countries shape economic outcomes.
Real-World Relevance
This isn’t abstract theory. The UK’s current account has been in deficit for decades, raising big questions about long-term sustainability. Students can explore:
The UK’s trade deficit with the EU post-Brexit and how that’s reshaped trade patterns.
The growing service export sector, especially in finance and creative industries, which offsets some of the goods trade deficit.
Sterling fluctuations—like after major elections or economic shocks—and their impact on import costs and export competitiveness.
Case studies: the UK’s trade relationships with China or the US, and how foreign direct investment (e.g. Nissan in Sunderland) features in the financial account.
These examples show students that economics isn’t just data—it’s deeply tied to politics, production, and people’s everyday lives.
How It’s Assessed
Assessment in Higher Economics is structured around demonstrating understanding, analysis, and the ability to interpret real-world data. Specifically for this topic:
Data-response questions: Students might be given balance of payments figures or news extracts and asked to explain causes and consequences.
Extended-response questions: Typically involve evaluating policies or scenarios affecting the balance of payments (e.g. “Discuss the impact of a weaker pound on the UK’s balance of payments”).
Command words to watch:
Explain – show understanding.
Analyse – make logical links and show cause and effect.
Evaluate – weigh up benefits, costs, and alternative viewpoints.
Clear diagram use and structured argumentation are key to top marks.
Enterprise Skills Integration
This topic is a natural fit for building economic thinking and enterprise capability:
Problem-solving: Interpreting data and identifying economic challenges (e.g. trade deficit causes).
Decision-making: Analysing policy responses like tariffs or export promotion.
Resilience and adaptability: Understanding how economies adjust to shocks, such as a financial crisis or pandemic.
Numeracy: Calculating trade balances, percentage changes, or interpreting graphs.
Simple classroom simulations—like trading games with currency fluctuations—can bring these ideas to life while embedding real enterprise skills.
Careers Links
Understanding the balance of payments ties directly to multiple career paths:
Economist or data analyst: Interpreting national and international economic data.
Policy adviser: Informing decisions on trade, taxation, or currency strategy.
Financial services: From investment banking to risk assessment, international transactions matter.
Gatsby Benchmark 4 & 5: This lesson links curriculum content with real economic roles and encourages engagement with how economic thinking plays out in actual jobs.
Guest speakers from financial services or HM Treasury can add real value.
Teaching Notes
What works well:
Start with a simple question: “Why does it matter if we import more than we export?”
Use up-to-date graphs and news headlines—these grab attention and ground abstract concepts.
Scaffold longer written responses with PEEL structure (Point, Explain, Example, Link).
Common pitfalls:
Students often confuse the current account with the capital account—visual aids help.
The term “deficit” is misunderstood as inherently bad. It’s more nuanced. Encourage discussion on context and sustainability.
Extension activities:
Research task: Compare the balance of payments in two countries (e.g. UK vs Germany).
Debate: “Should the UK focus more on manufacturing to reduce the trade deficit?”
Practical: Run a mock trade negotiation between ‘nations’ in class, simulating the impact of tariffs and currency changes.
