Balance of payments

Question 1

Current account

Answer 1

Account identifying transactions in goods and services between the residents of a country and rest of world, together with income payments and international transfers

Question 2

Financial account

Answer 2

Account identifying transactions in financial assets between the residents of a country and the rest of the world

Question 3

Capital account

Answer 3

Account identifying transactions in (physical) capital between residents of a country and the rest of the world

Question 4

Visible trade

Answer 4

trade in goods

Question 5

invisible trade

Answer 5

trade in services

Question 6

Fixed XR

Answer 6

a system in which the government of a country agrees to fix the value of a currency in terms of another country

Question 7

Foreign exchange reserves

Answer 7

Stocks of foreign currency and gold owned by the central bank of a country to enable it to meet any mismatch between the demand and supply of the countries currency

Question 8

Devaluation

Answer 8

Process whereby a government reduces the price of its currency relative to an agreed rate in terms of foreign currncy

Question 9

Revaaluation

Answer 9

Process whereby government raises the price of domestic currency in terms of foreign currency

Question 10

Floating XR

Answer 10

a system in which the exchaneg rate is permitted to find its own level in the market

Question 11

Hot money

Answer 11

Stocks of funds that are moved around the world from country to country in search of best return.