Balance Of Payments Key Terms Flashcards
Exchange rate definition
The rate at which one currency trades against another on the foreign exchange market
Currency depreciation definition
When there is a fall in the value of a currency in a floating exchange rate
Current account definition
Consists of Trade Balance, primary income & secondary income of the economy
Capital and Financial account definition
Consists of short term/ medium flow and net exchanges held in central bank
Emerging economy definition
A country that is becoming a developing economy. Often driven by high economic growth and investment, a lot of production
Primary income definition
Consists of profits, dividends assets abroad, migrants remittances
Secondary income defintion
Unilateral transfers. Foreign aid eg NATO, EU
Hot money definition
Capital flows moving to a country with higher interest rates interest rates or expected changes in
FDI (foreign direct investment) definition with example
The net inward flow of investment made by non-resident investors eg Nissan is a jap owned company have factory in the uk
Marshall Lerner condition
An economics principle that states that the appreciation will improve trade balance depending on its price elasticity
Portfolio investment definition
Investment in debt or equity eg bonds or shares
Expenditure switching policy
Changing goods that consumers buy eg tariffs that increase imports good costs so more people buy domestically produced goods
Balance of trade definition
Value of exports - value of imports. Refers to both visible and invisible
Global supply chain definition
The movement of goods & supplies around the world. Including raw materials + labour
Expenditure reducing policy
Contractionary policies to reduce imports & make exports more competitive
