Exam 2 Flashcards
GDP
the market value of all final goods and international trade and the two main components of the current account.
GNP
the market value of all final goods and services produced by the residents of a nation, regardless of where the production takes place. GNP equals GDP minus income paid to foreigners plus income received from abroad
Trade deficit
a negative merchandise trade balance; the deficit may or may not include measurement of service trade
Current account (surplus / deficit)
a record of transactions in goods, services, investment income, and unilateral transfers between the residents of a country and the rest of the world
Capital account
a record of transactions in highly specialized financial assets and liabilities between the residents of a nation and the rest of the world
Fixed exchange rates
an exchange rate that is fixed and unchanging relative to some other currency or group of currencies
floating exchange rate system
when supply and demand for foreign exchange determine the value of a nation’s money
Purchasing power party
an adjustment to exchange rates or incomes designed to keep constant the real purchasing power of money when converted from one currency to another
fiscal policy
policies related to government expenditures and taxation
monetary policy
national macroeconomic policies related to the money supply and interest
J curve
a currency depreciation often results in a worsening of the trade deficit in the short run and an improvement in the long run
Financial crisis
Usually involves a banking crisis and may also entail an exchange rate crisis. A financial crisis results in disintermediation and a slowdown in economic activity that may be severe
Moral Hazard
A financial incentive to withhold information, take on excessive risk, or behave in a manner that generates significant social costs
C
Consumption Expenditures
I
Investment Expenditures
