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Economics Today The Macro View Ch. 33 Exchange Rates and the Balance of Payments
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Economics Today The Macro View Ch. 33 Exchange Rates and the Balance of Payments 1. Balance of Trade ️: The difference between exports and imports of physical goods. 2. Balance of Payments ️: A system of accounts that measures transactions of goods, services, income, and financial asset...

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  • September 9, 2024
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Economics Today The Macro View Ch. 33 Exchange Rates
and the Balance of Payments


1. Balance of Trade ✔️: The difference between exports and imports of physical goods.




2. Balance of Payments ✔️: A system of accounts that measures transactions of goods, services,

income, and financial assets between domestic households, businesses, governments, and residents of

the rest of the world during a specific time period.




3. Accounting Identities ✔️: Values that are equivalent by definition.




4. Disequilibrium ✔️: If family expenditures exceed family income and this situation is financed by

borrowing, the household may be considered to be in disequilibrium because such a situation cannot

continue indefinitely.




5. Current Account ✔️: A category of balance of payments transactions that measures the exchange of

merchandise, the exchange of services, and unilateral transfers.




6. Current Account Surplus ✔️: If the sum of net exports of goods and services plus net unilateral

transfers plus net investment income exceeds zero.

,7. Current Account Deficit ✔️: If the sum of net exports of goods and services plus net unilateral

transfers plus net investment income is negative.




8. Capital Account ✔️: A category of balance of payments transactions that measures flow of financial

assets.




9. Official Reserve Assets ✔️: Includes foreign currencies, gold, Special Drawing Rights (SDRs), reserve

position in the IMF, and financial assets held by an official agency.




10. Special Drawing Rights (SDRs) ✔️: Reserve assets created by the IMF for countries to use in settling

international payment obligations.




11. International Monetary Fund (IMF) ✔️: An agency founded to administer an international foreign

exchange system and to lend to member countries that had balance of payments problems.




12. Foreign Exchange Market ✔️: A market in which households, firms, and governments buy and sell

national currencies.




13. Exchange Rate ✔️: The price of one nation's currency in terms of the currency of another country.

, 14. Flexible Exchange Rates ✔️: Exchange rates that are allowed to fluctuate in the open market in

response to changes in supply and demand.




15. Appreciation ✔️: An increase in the exchange value of one nation's currency in terms of another

nation.




16. Depreciation ✔️: A decrease in the exchange value of one nation's currency in terms of another

nation.




17. Slope of Demand Curve ✔️: Downward sloping.




18. Market Determinants of Exchange Rates ✔️: Includes changes in real interest rates, changes in

consumer preferences, and perceptions of economic stability.




19. Bretton Woods and the IMF ✔️: The creation of the IMF in 1944 by representatives of the world's

capitalist countries.




20. Foreign Exchange Risk ✔️: The possibility that changes in the value of a nation's currency will result

in variations in the market value of assets.

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