exchange rate and deficit Flashcards
How are contractionary Fiscal policy and budget surplus linked?
Both are used in a boom and contractionary Fiscal Policy leads to a budget surplus
What is meant by the term budget (or fiscal) surplus?
Is when government spending is less than taxation
What happens to the exchange rates when interest rates rise?
The £ appreciates because there is greater ‘hot money flows’ due to the higher interest rates.
What is meant by the term Stagflation?
Is an economy that is stagnant (not growing) but is also suffering from inflation
Balance of payments deficit
The amount by which the sum of the balance on the current account and the balance on the capital account is negative in a year
Balance of payments surplus
The amount by which the sum of the balance on the current account and the balance on the capital account is positive in a year
Exchange rate
The rate at which the currency of one nation is exchange for the currency of another nation
Flexible or floating exchange rate system
A rate of exchange determined by the international demand for and supply of a nations currency
Fixed exchange rate system
Rate of exchange that is prevented from rising or falling with changes and currently supplying demand
Depreciation
A decrease in the value of the dollar relative to another crazy, so I dollar buys a smaller amount of the foreign currency and therefore of foreign goods
Appreciation
An increase in the value of the dollar relative to another crazy, so a dollar buys a larger amount of the foreign currency and therefore of foreign goods.
Currency intervention
A government buying and selling of its own currency or foreign currencies to alter international exchange rates
Rate of exchange
The price paid in one’s own money to acquire one unit of a foreign currency; the rate at which the money of one nation is exchange for the money of another nation
International monetary reserves
The foreign currencies and such assets as gold Anisha me used to settle up payments deficit
Currency intervention
A government buying and selling of its own currency or foreign currencies to alter international exchange rates