Chapter 6: International Trade and Foreign Exhange Flashcards
What are restrictions on free exchange of goods and services?
Trade barriers
What is exchange of goods, services and capital between countries?
International trade
What are taxes levied on imported goods and services?
Tariffs
What are limits on quantity of goods that can be imported?
Quotas
What include a range of measures such as certification, licensing, sanctions, or embargoes, which make it more difficult and expensive for foreign producers to compete with domestic producers?
Non tariff barriers
What is it when a country is more efficient in producing a good or a service than other countries and needs less resources to produce the good or service?
Absolute advantage
What tracks transactions between a country and the rest of the world over a period of time, usually a year?
Balance of payments
What is primarily driven by the trade of goods and services with the rest of the world, that is exports and imports?
Current account
What reflects the ownership of assets - in particular, it reflects the types of investments domestic entities make in foreign entities as well as types of investments foreign entities make in domestic entities?
Capital and financial account
What is difference between exports and imports of goods and services?
Net exports or balance of trade
What are the three sub accounts that make up for the current account balance?
Goods and services, income and current transfers
What is currency that is held in significant quantities by many governments and institutions as part of their foreign exchange services?
Reserve currency
What are investments made by foreign investors and companies?
Foreign direct investments
What is risk associated with fluctuation of foreign exchange rates?
Currency risk or foreign exchange risk
What is decision made by country’s central bank to decrease the value of domestic currency relative to other currencies?
Devaluation
What is the system where the central bank does not intervene and lets the market determine the value of its currency?
Floating exchange rate system
What is system where central bank intervened to stabilize its currency?
Managed floating exchange rate system
What is exchange rate at which bank or citric dealer will buy the foreign currency?
Bid rate or bid exchange rate
What is exchange rate at which the ban it dealer will sell the foreign currency?
Offer exchange rate or offer rate or ask exchange rate or ask rate
What is market where currencies are traded now and delivered immediately?
Spot market
What is market where currencies are traded now but delivered at some future date?
Forward market
What is a risk management strategy used to limit the potential of loss as a result of fluctuations in the price of commodities, currencies or securities?
Hedging
High interest rates tend to lead to an appreciation or depreciation of domestic currency?
Appreciation
What is concept where currencies are daily valued relative to each other?
Purchasing power parity
