I'll tell you. Let me just find it. The uk government sort of does it in various different ways. One of them, which I like, have you ever heard of these? Is these, have you ever heard of these season were very uk thing. So have you ever heard of premium bonds? If you heard of them, probably not. They're a very uk thing. So what premium bombs are is premium bonds allow a person. So you. To buy up to 50000 pounds. A bonds okay. And then each month. A bond or bonds. To win up to a million pounds. Okay and people have these and it's like a way of gambling, if you like, but it's also a way of saving for individuals. Now this is run by the government. So the government is the person that has all of this 50000 pounds of people's money. It's like a government owned bank. So Jackson gives the government 50000 pounds, okay, to save. He doesn't get any else this wise pounce. Yeah, it's 50000 pounds that they're called bonds each bond. So then like or another word would be like A A ticket. Each one is worth a pound each ticket. Like you could say ticket. So for example, you could buy 20000 pounds. Of bonds, okay, 20000 pounds you could put in premium bonds. Now this would give you. 20000 tickets, if you like, or chances of winning. Because each bond. Is a pound okay? So then what happens is you've got your 20000 pounds or your 50000 pounds of bonds, and you don't get interest on this like a normal bank. You just get the chance to win or not. So some months you'll win some money, anything from 25 pounds to a million pounds. And this is what people like them. And this is a way, because it's government owned, the government can spend that money. The government can spend the money you've given them. Now you can get it back. It's in exactly the same way as a bank spends money because, you know, banks, they they borrow people's money, don't you? You know how banks work, don't you? It's the, this is the same principle as banks, but it's government run. So do you know with a bank? Here's the bank here and say you saved say you saved 10000 pounds. You put 10000 pounds in a bank. Okay, and that's in the bank account. Now that's in the bank. Your 10000 pounds doesn't just sit in that bank waiting for you. The bank uses your 10000 pounds and lends it to other people. And let they do that to make money. Okay, so they lend it so they might lend this person, I don't know, 5000 pounds. And they might learn this person. 5000 pounds. Okay, so you're 10000 pounds, you're over here, you've saved 10000 pounds. Okay. In the bank Oh, I didn't mean do that. It doesn't just sit in the bank. The bank use your money to make money because then you see what happens is this person, and this person pay interest, don't they, to borrow the money. So they might pay 10% interest. Yeah, okay. So when they pay it back, they pay back. Let's just let's just keep the numbers easy. 5500. And this one pays back 5500. They've paid it back. So the bank now has with your 10000 pounds, the bank now has made 11000 pounds because they've used your money to lend it to other people to make money. Yeah. Do you know that that your money just doesn't sit in a bank when it sits in a bank? It's been a lend out to other people. They use it to lend out to other people. Not really. Maybe they do not really save the money in the bank. Maybe. So. So I save and I pay for bank. Yeah you save and the bank uses your money. I can get some interest rate and the bank will use my money to borrow another, borrow to another people and then another people should pay. I should repay with a higher price, but the sum of this money is the same. Yeah, Yeah, Yeah, Yeah. They then pay it back. And the interest rate, you're exactly right. The interest rate you get is slightly less than what they will lend it out for. So they might charge 10% to the people borrowing the money, and they might give you, say, 4%. So the bank makes, you know, 6% on your money that it lends out. Another understand at this point, so the bank here charge 10%, they make 10% to borrow it out. So this side, they've lent out 10000, 5000 to each of them. The interests they charge was 10%. So they get back. And extra 1000. Don't like 10%, so the money. Whereas on your one your saving side. You save 10000. You get an interest rate off or sent. So you get. An extra 400 pounds. So can you see the bank have used your money? They get a thousand pounds and pay you 400 of that. So they are left with the extra 600. And this is the banks profit. This is how the bank makes profit. If that makes sense. So they've taken your money you've put 10000 in to save and you're getting an interest rate of 4%. So you get an extra 400 pounds a year on your 10000. So you'll get 10400 at the end of the year, okay? And you're happy but the bank take your 10000, okay, and they lend it out to these people. And they charge them 10%, they charge them more than they give you. So they take the money back from them, and they're left with their profit in the middle. Talk me through it because I think you've got it, but you just don't think you have talk me through it. What you understand so far. But I still think. Yeah that these two people should repay 5005 5500 for each people. So the sum of this is 11000. And this 11000 will will give another people. Yeah, Yeah, they could lend that out again. So where's the profit? Well, the profit is the difference between the original amount, which is the 10000 because remember, they only lent out 10000, didn't they? And what they got back. So the profit is the 1000. Now of that 1000, you're right theylend, that 10000 out again, off that 1000, you've got to give you 400 because they're using your money so they're gonna to use give you 4% of the amount you invested Yeah because otherwise why would you put your money in the bank okay so they've got to give you 400 so they're now left with 600 okay and that 600 can either be their profit which they keep or they can lend it out again they can either lend out the original 10000 again. Or if they don't take the profit, they can lend out 10600, lend out more, and they more money. So then they lend it to more people. Okay, so that's how bank the bank works. The whole idea is the bank uses money that's saved and they lend it out to other people at a higher price. Okay, you know, this is important. I'll come back to this in a minute. Now the bank can only there's those rules about what they look and lend. So they can only lend what they have, okay? So they can't lend out, say, 30 million and only have 10000 pounds in savings, which is why they want the savings money, okay? They want to borrow that money, okay? So going back to the government, what the government do is they get people to lend the government money, give the government money in exchange for winnings each month. So these ones, they are moved. They. Remain plans to encourage individuals to keep them money in the form of savings exactly like the bank. So they act like a bank. So the government will. Theygive winnings so theyget theygive like it's a bit like a lottery for the people. And these people can win anything from 25 to 1 million pounds. Okay, so say for example, as me as an individual, I might buy, let's say I bought 50000 pounds of premium bonds, right? So I gave the government, put in the government savings account, 50000 pounds of bonds. I don't get any interest on this. I just get the chance every month to win a different amount, okay? And know 50000 pounds sometimes I might win 25 pounds sometimes, I might win 500 pounds, sometimes I might win 5000 pounds. Okay, you don't know. And then some lucky people from 50000 pounds get a million pounds, okay? So it's just a way of the government using people's money. So what they could do is they could get more people to put in money to borrow more and they would have to pay more back in interest, if you like these winnings. They also. Do this. They borrow money from investors, okay? They sell financial products and these are called government bonds, okay? Called gifts that is. So financial products selling financial products. Process proves money by selling financial products to investors. So to investors promising to pay back the principal plus regular interests over set periods, overset periods. So is that means the same profit but the different but the longer period? Yeah, Yeah. So you basically the government sell these guilts, okay. And this is where so it's where you lend the uk government for a set period. So you would lend to the government a guilt. Where you lend the uk government for a set period and in return, the government pays you regular interest and returns on your original money when the bond matures. So for example, it might be for five years, it could be for ten years, okay, that you're lending this money to them. It could be for four years. I don't know. All different. Depends which one you buy. So you would lend them, they would know they would have your money for five years, and in exchange for having your money, they would pay you a little bit of interest each year. Okay? They're considered a very low risk investment. They're not like stocks and shares or cryptocurrency, which is seen as high risk investments because the government is very reliable at paying back its debt. And they caught guilt because the old paper certificates had gold edge borders. So they just caught guilts for that reason. So if a government wants to borrow more money, it just issues more guilts. But that means it has the increased cost every month of paying the interest for borrowing this money. Oh. The uk government is extremely physical. Okay, it's because old paper certificates have go the orders. So it's just why they're called guilts because they used to have gold edges on the borders. It's just a way to remember it. Okay. So back to the original question. When. So budget deficit. When a government spends more money than it collects in revenues, taxes and fees, requiring borrowing and increasing national debt, and it often used to stimulate a weak economy, and then we could say. Say say what budget deficit in this instance? I need to issue more. Who overcome this deficit? Okay, so a budget deficit, when a government spends more money than it has, requiring borrowing and increasing national debt, often mulstimulate a weak economy. In this is instance, the government may need to issue more guilt to overcome this deficit. Does that make sense to you? So to be able to borrow, it needs to make more guilts. Guilts are. This. So the government issues these, so it gets more money from financial markets and people. More money. So it keeps the same interest rates in different period. This one does yet. So if we save the money for the long time, we can get less money back. But if people borrow money, they may be repay more, so that, that is a profit. Yep. Yep. So in the banks, obviously that's how they make profit with the government, it's about how they get money. So budget deficit is where as they spend more money than it collects, meaning they need to borrow from somewhere. So they may need to issue more guilts to overcome this. So that gets them more money. Okay. And a budget surplus. So a budget surplus is the opposite. So where revenue where does the government get revenue from? When we say revenue, when we talk about government, where does it get tell me places the government would get revenue from. It's revenue. Yes. Yeah it's good. Yeah access etc.. Yeah that's where the government gets revenue from. So from taxes et cec, the opposite occurs where revenue, so money coming in from tax exceeds spending. So it's bigger than the amount you need to spend. So it allows the government to repay its debts or tax cuts or they could save for future needs. Okay? So the government could either save the money, they could reduce the taxes, or they could repay debts. What would be, let's go through this, what would be good? Why would it be good for a government to reduce taxes? Why would a government what are your good things about reducing taxes? Reducing taxes, the good things. The advantage is that people have more money to spend on. So the consumption will increase and aggregate demand mands will increase with and and maybe let the curve shift to the right. Good, good, excellent. And you see how there. See how there? We've just got a definition and you've just added a lovely little explanation there. You know we talk about getting higher Marks. That would be a really good thing to put in there where you ever see anything about tax cuts this could lead to? And that beautiful just sort of section you just said very good. Okay, what would be good about paying the debt, the government repaying the debt they had. We paid they paid off their debt. With associate money they owed. That's money the government owes. How to spell it? So how to spell deth bebt bt. Deokay, Yeah Yeah Yeah so so Yeah Yeah it's like me slow so. So what would be that is btax and these people had debt, then they have more money to repay it, to repay this debt. So if they have more money to replace this off, is any. Why would it be good? I'll give you a clue. You think about it, if you owe lots of money. If you owed lots of money, Oh, should gar me to that. And then you got money. You should always pay off your debt first, shouldn't you? Because on money you've borrowed, you normally have to pay interest. So if the government paid off their debt, they wouldn't be paying as much interest, would they? So their outgoings each month goes down. Would you understand that decreases that they have to pay. So they have to pay interesting then do okay pay less interest rate. So is there any is there any relevance with the interest rate and less tax? No, it's just it's it's not really linked like that. It's more that the government if the government has more money than it's spending, it's got a few options of what it can do with this money. You've talked about the advantages of tax cuts. We've talked about it would be good for them to tax reduce taxes and you gave me lovely reasons why about aggregate demand. Okay. But another thing they could do is pay off the money they have borrowed in the past, their debt repayment. Now, what we're trying to do is think of a reason why they might do that. What would be good for them to pay off the money they had paid, they had borrowed in the past? Well, the reason for that is the money they borrowed in the past is expensive. It costs the money every month. They have to pay interest on that money. So if they paid off that debt, then that their costs, their outgoings decrease, which means they could you know again, they've got more money because they're not having to repay this extra debt, this extra interest. Okay, okay. So that's all that's all that is what would be an advantage for a government of saving for the future instead of cutting taxes. So that is long term. Future term is the part of long term. Maybe they make some prepare for the future, for example, some objective conditions like natural disease or some or some, let me think, or maybe some. Illness, maybe maybe they have enough money to pay for that. Good. Good. Is it is about sort of a government planning for the future and thinking, well, hang on a minute, I might need money in the future. Maybe like you say, you've got some big infrastructure projects they want to do. Maybe they want to build airports, I don't know. Housing estates, whatever. I don't know, because hospitals, they want to invest in defense and they think, well, we'll save that you know for a couple of years or Green energy, something along those lines. So Yeah, they could or they see that their economies aging and they're gonna to need money in the future. So Yeah, but most of the time, to be honest, when a government has a budget surplus, so when it has more money than it is spending, they do this one, the one you said first, they they cut taxes. It's usually the best option for them. And it's also politically popular. Why would it be popular with the voters? Why would the voters like that one? I don't know. Well, do you think people like paying tax? No, of course not. Grothen, so tell me, so they would always, the government would always choose that one because they're voted in, aren't they? They want to, okay. Well, if the tax rate increases. That mean people has less money to spend on essentials. So the consumption will decreasase because people has less money to spend their goods. Yeah exactly. Exactly. And people are less happy and all the rest of it. So Yeah, very, very good. Okay, good. So budget deficit, budget surplus and the sort of linking bits around there. Do you want to take a screenshot of. This bill really is the most important one. Okay. Okay. Do you have any other sort of definitions or anything you wanted to go through? Yeah, about balance of payments? What about what you want to know? The definitions and something is relevant to it, okay? Let me see if I can find what paymenwrong here to ignore my. Okay. So what sort of thing does it include? Can you remember? No, okay. Right. Second is going to. Okay, the current, the ballast veements is a record of all economic transitions between our country and the rest of the world. Yep. Can you remember we drew the map, we drew the circle before and then we had goods going out and money coming in. Yeah. Yeah. So it records how much stuff goes out of a country and how much stuff goes into a country. Okay? So it's divided into two main components, the current account and the capital financial accounts. Okay? The current account is the one we look at mainly, okay? And this is about how much stuff goes out and how much stuff comes in, okay? So have a little read of the next bits and yellow. Batis diviinto two main claimments the current economy has a capital and financial account balance of trade, includes measures that differbetween the value of country's exports and imports touchable goods. A Treplus occurs when exports exceed imports, and a trade deficit occurs when import exceed exports. An example. China considering runsattrade surplus, its strong manufacture sector, importing products, worlworldwide Yeah balance of training services. It accounts for the value of services trade internationally such as tourism, financial services and consulting. Yeah. And the capital and financial accounts. Okay. And the other part of it that we don't look at as much is more looking at the flow of any other money, okay? Not from the sale of goods or services. So the capital and financial accounts were called capital flows. So money flows into and out of a country. The financial account tracks financial assets and liabilities such as foreign direct investments, you know other businesses. Investing in your country. Okay. Do you remember this now sort of roughly, do you think so you're okay with the balance of payments? It is just simply this. The balance of payments definition is simply this, that top line. Yeah, this is your definition. These are your two sort of a bit more details with it so you remember what it is and the current account is the thing we look at the most. Okay, you want to take a screenshot of that and then I'll just go on to the next bit that links to this. Okay? It's just always was gonna to scroll down and I'll start drawing all over. I know when I'm like. Yeah. Okay. So with this, what do you think could impact the balance of payments? What could impact the balance of payments? What could make either a surplus or a definite sorry, gone, I'm not understand for this question. Oh, so what, miss, can you repeated the question? Okay, what would affect the balance of payments? What things do you think would affect how much we trade, say, China sort of about this, about this circle influence? Yeah about the circle of the money in flowing. Yeah p good. I mean circle. Okay, circular parts, six parts, six parts. Ts will influence the banans investment saving, taxation, consumption Yeah, maybe consumption, taxation saving. Let me say again, so the taxation. Saving imports, government spending, exports and investment. Six parts good. All impact. All are this circular flow of income. The yellow part is imports and exports. Yeah really that's all your imports and exports about how much goods come in. So that would impact the balance of payments. It's all linked like that. What would make more goods go out? Why why does let's take China just because it's the example there, it's runs a trade surplus so it exports more out. Why? What could impact what things could alter the balance of payments? So take China as an example. Why does that have a trade surplus? Why does it export lots of things? Or why would any country be able to export lots of things and surplus? Yeah maybe China exports many things. Yeah made in China. Yeah it's very famous for the several for the several ten years. Yeah maybe good. And what do you think China does, right? That if another country say say uk was set there and like we want to increase the amount we export, what could they do that China does to try and export more? Thanks. Exports more. Exports more. Increase the aggregate demand or increase the consumption or maybe government spending. Government spending. Good. Tell me, what could the government spend money on to make people want to buy more British products? More British products? Yeah if if if we wanted to, if we were like, right, okay, we want to be like China. We want to export more. What could they what could we do? Exports? Is that British exports more to China or China exports more to British? Well, either whichever way around you want to argue it, whichever way you can think of an answer. I'm just trying to work out what factors you can think of the impact, the balance of payments, how could you increase what you're exporting? Okay. So if British wants to export more to China, maybe Chinese government can decrease the tariff. Girls, tell me, talk to me. And then we'll make uk exports more cheaper. So people were willing to buy when and uk exports has more demand. If that is, China wants to give more exports, more in British, maybe the Chinese government can give more government spending to decrease total total costs. And that will make the exports keep the same quantity, same the same quality, but the cheaper price very good. And obviously the cheaper price, Blaber bar theysell demand more excellent. So these are all the things that could impact technology is another one. Always throw in technology they could invest in you know tech to make better products, keeping up with trends, etc. They could partner with sort of large firms such as apple or energy firms or anything. Quote you mentioned tariffs, very good quotas as well. If there was any quotas, they could remove them. What's a quota? Quota. The quota maybe means the. The quality this government wants to. No, no, no, not quite quota remember quota and tariff, so tariff. Yeah quarter Yeah quarter Yeah these amounts this some amounts which this government won't Yeah or f. Yeah it's the amount that it's amount they let come into the country. A quota is the amount in sort of trade terms, it's the amount they let come into a country. So Yeah, very good. So quotas, they can produce quotas. Technology. Now the government can't really affect it. But what one of the big things that affects how much a country country buys off another country is the exchange rate. Talk to me about the exchange rate and how that links with imports and exports if you come if exchange rates is high or low. So the price of the money. So in the example we had, if the Chinese currency suddenly became very, very expensive, it had to, you know, the exchange rate increased. What would happen? People would buy less of their goods, wouldn't they? Yeah, Yeah. Do you want to explain that to me? So how exchange rates impact imports and exports? Well, well, there's an word spiced, and that is strong pound. Has a strong pound, have. Cheap. Cheaper imports and dairy exports so stronger the stronger pounds means x strong exchange rate. So and if the extent really strong, that means less the same. There's a different ratio that means the value of the pound increase. So it's difficult for another country to exchange the money, for example, yuan or yuan in pounds because counts will be more more expensive. For example, one yuan may be same as ten pounds, but now one yuan is same as five pounds. So very good. That is that is more expensive. So that will leave it to the Yeah the cheaper imports, but the but but the expensive exports leading to a decrease in the current account Yep and leading to a balanced payments deficit. So can you see how exchange rates linked to the current account and the balance of payments, so exactly what you've said there was perfect. Yeah and if you then wanted to link in the balance of payments, etc, you could then say leading to a decrease in the current account and as such, a balance of of payments deficit deficit. Yeah. So can you see how you know that exchange rate stuff? You talked about it very confidently, and that was very good explanation. And you could now just add on what I've put in purple every time you talk about that exchange rate stuff, it would just that sentence on the end extends your answer, adds in another topic. Do you see that? Yeah Yeah. Does that help? That's sort of how we link it all together because I think I think now every time you speak of something with confidence like you did that we need to then add the next thing on. So when you start, you've got loads and loads you can say and that will really help with your questions, you know extending your answers. Okay. Do you want to take a screenshot of that? Yeah have you got another lesson you're doing now? Yeah I've got ten minutes. Oh okay, okay, okay, right. Well I'll let you have a drink or whatever before your next lesson. I'll see you at 9:00 tomorrow. Is there anything else you want to sort of go through or anything for me to prepare? Are you gonna tell me tomorrow? Okay Yeah alright then alright then. Have a nice day. See you later.