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Economics (Ch20-21)
| Question | Answer |
|---|---|
| Balance of Payments | An accounting record of all monetary transactions between a country and the rest of the world. |
| Current Account | the sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid) |
| Balance on Goods and Services | A systematic record of a nation's total payments to foreign countries. |
| Trade deficit | A country's imports exceeds its exports. |
| Trade Surplus | A country's exports exceeds its imports. |
| Capital and Financial Account | Records debt forgiveness and foreign purchases of assets in the US and abroad. |
| Balance- of- Payments Surplus | Net amount of official reserves a nation must purchase to achieve balance between the capital and financial account and its current account. |
| Official Reserves | Holdings of gold and foreign currencies by official monetary institutions. |
| Balance- of- Payments Deficits | Net amount of official reserves a nation must sell to achieve balance between the capital and financial account and its current account. |
| Flexible- or floating- exchange- rate System | its value changes constantly depending on the supply and demand for that currency, as well as the amount of the currency held in foreign reserves. |
| Fixed- exchange- rate System | the government or central bank ties the official exchange rate to another country's currency Read more: http://www.investopedia.com/terms/f/fixedexchangerate.asp#ixzz1gT8vhokB |
| Purchasing Power Parity Theory | he exchange rate between one currency and another currency is in equlibirium when their domestic purchasing powers at that rate of exchange are equivalent. |
| Currency Interventions | the buying or selling of currency by central banks in an attempt to manipulate the price of a particular currency. |
| Exchange Controls | Types of controls that governments put in place to ban or restrict the amount of foreign currency or local currency that is allowed to be traded or purchased. |
| Managed Floating Exchange Rates | a currency's value is allowed to fluctuate according to the foreign exchange market |
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