Chapter 17 - Openness in Goods and Financial markets Flashcards
openness in goods markets
the ability of consumers and firms to choose between domestic goods and foreign goods
openness in financial markets
the ability of financial investors to choose between domestic assets and foreign assets
openness in factor markets
the ability of firms to choose where to locate production, and of workers to choose where to work
tradable goods
goods that compete with foreign goods in either domestic markets or foreign markets
Nominal exchange rate
the price of the domestic currency in terms of foreign currency
real exchange rate
the price of domestic goods relative to foreign goods
appreciation
an increase in the price of the domestic currency in terms of a foreign currency
depreciation
a decrease in the price of the domestic currency in terms of a foreign currency
fixed exchange rates
a system in which two or more countries maintain a constant exchange rate between their currencies
in the fixed exchange rate system; revaluations
revaluations are increases in the exchange rate
in the fixed exchange rate system; devaluations
devaluations are decreases in the exchange rate
current account balance
the sum of net payments to and from the rest of the world
current account surplus
positive net payments from the rest of the world
current account deficit
negative net payments from the rest of the world
GDP
measures value added domestically
