Chapter 5 The Global Economy Flashcards
exchange rate
Exchange rate are the price of one currency stated in the terms of another currency
example one euro equals $.90
Floating exchange rates
Exchange rate set by the market are called floating exchange rates.
What makes the value of a currency increase.
Exports
What decreases the value of a currency
Imports
Exchange rates affects the prices of
Goods offered for sale in international market
Balance of payment accounts for the value on international accounts
Is divided into current account and capital and financial accounts
The current account
Considers goods and services ,exports and imports + certain money flows
The capital and financial account
Considers changes in foreign owned assets, including government assets.
The current account and capital and financial accounts plus statistical discrepancy always sum to
Zero
How do Countries try to manipulate the terms of trade to their advantage.
They use tariffs ( taxes on imports)
Quotas
Health and quality standards
Licensing requirements to block imports.
Subsidies can also be used to increase exports.
What has the GATT General Agreement on Tariffs and Trade and its successor the World Trade Organization successfully accomplished?
They have dramatically lowered tariffs and other trade barriers around the world.
Trade has exploded as they have done so.
Trade deficit
-occurs when one country buys more foreign goods than it sells to other countries. When imports exceed exports.
Tariff
-is a tax that applies only to goods entering a country. It is exactly like the SalesTax usually charged to porches goods inside of a country, except that it is not charged against domestic goods.
Trade barrier
-method of limiting trade with other countries.
World trade organization
-Administers the rules governing trade between its 144 members. Helps producers, importers, and exporters conduct their business and ensure that trade flows smoothly.