Module 7 Flashcards
Export
Any transaction that brings money into the country
Import
Any transaction that takes money out of a country
Balance of Payments
We measure imports and exports in this accounting system
2 parts in Balance of Payments
1) International Transactions Accounts (ITA)
2) International Investment Position (IIP)
Accounts in International Transactions Accounts
1) Current Account
2) Capital and Financial Accounts
3) Statistical Discrepancy
(Current account and capital and financial accounts must sum to zero, the remainder is statistical discrepancy)
Makeup of Current Account
1) Exports and Imports
2) Primary & Secondary Income
3) Government Transactions
Primary Income
When a person is paid for their job by someone in another country
Secondary Income
Sending money to people in other countries
Capital Account
Mostly licenses and intellectual property (copyrights, patents)
Financial Accounts
Assets
1) US owned assets in other countries
2) Foreign owned assets in the US
Exchange Rate
The price of dollars in terms of another currency
Floating exchange rate
An exchange rate set by a market
Fixed exchange rate
Exchange rate set by a government
What causes the up and down movement of currency in an exchange rate?
Scarcity
Exports ________ the value of your currency and imports _________ the value
Increase
Decrease
Appreciation
Exchange rate rose because of the market
Depreciation
Exchange rate fell because of the market
Revaluation
Government raised the exchange rate
Devaluation
The government lowered the exchange rate
Import prices ________ when the $ falls
Export prices _____ when the $ falls
Rise
Fall
Article 2 section 2
President shall have the power, with advice and consent of senate, to make treaties, provided 2/3 of senators present concur; and he shall nominate and appoint ambassadors
Section 232
President can place tariffs on goods if necessary for national security - protect resources needed by the military
How do countries control trade?
1) exchange rates
2) tariffs
3) quotas
4) licensing
5) health and safety rules
6) ownership requirements/capital controls
