Ch 21 Flashcards
Balance of Payments
A summary of all the transactions that took place between the individuals, firms, and government, units of one nation and those of all other nations during a year
Current Account
The section in a nation’s international balance of payments that records its exports and imports of goods and services, its net investment income and its net transfers
Balance on Goods and Services
The exports of goods and services of a nation less its imports of goods and services in a year.
Difference between US Expoerts of goods and services and Imports of foods and services.
Balance on Current Account
The exports of goods and services of a nation less its imports of goods and services plus its net investment income and net transferrs in a year
Capital and Financial Account
The section of a nation’s international balance of payments that records
1) debt forgiveness by and to foreigners
2) foreign purchases of assets in the United States and US purchases of assets abroad
Balance on the Capital and Financial Account
The sum of the capital account balance and the financial account balance
Balance-of-Payment Deficit
The net amount og official reserves (mainly foreign currencies) that a nation’s treasury or central bank much buy to achieve balance between that nation’s capital and financial account and its current account (in its balance of payments)
Balance-of-Payment Surplus
The net amount of official reserve (mainly foreign currencies) that a nation’s treasury or central bank must buy to achieve balance between that nation’s capital and financial account and its current account (in its balance of payments)
Official Reserves
Foreign currencies owned by the central bank of a nation
Flexible- or Floating- Exchange-Rate System
A rate of exchange determined by the international demand for and supply of a nation’s money; a rate free to reise or fall (to float)
Purchasing-Power-Parity Theory
The idea that exchange rates between nations equate the purchasing power of various currencies. Exchange rates between any two nations adjust to reflect the price-level difference between the countries
Currency Interventions
Exchange Controls
Controls a government may exercise over the quantity of foreign currency demanded by its citizens and firms and over the rates of exchange as a way to limit the nations quantity of outpayments relative to its quantity of inpayments (to eliminate a payments deficit)
Managed Floating Exchange Rate
An exchange rate that is allowed to change (float) as a result of changes in currency supply and demand bu at times is altered (managed) by government via their buying and selling of particular currencies
Trade Deficit
The amount by which a nations imports of goods (or goods and services) exceed its expoers of goods (or goods and services)
