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22 Cards in this Set
- Front
- Back
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Chapter 20 |
International Finance |
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20-1 |
Summarize the major accounts in the balance of trade, and explain how they balance out |
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balance on goods and services |
The portion of a country's balance-of-payments account that measures the value of a country's exports of goods and services minus the value of its imports of goods and services |
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net investment income from abroad |
Investment earnings by U.S. residents from their foreign assets minus investment earnings by foreigners from their assets in the United States |
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net unilateral transfers abroad |
The unilateral transfers (gifts and grants) received from abroad by U.S. residents minus U.S residents send abroad |
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balance on current account |
The portion of the balance-of-payments account that measures a country's balance on goods and services, net investment income from aborad, plus net unilateral transfers abroad |
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financial account |
The record of a country's international transactions involving purchases or sales of financial and real assets |
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20-2 |
Describe how the foreign exchange rate is determined using demand and supply curves and explain the shapes of the curves |
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currency depreciation |
With respect to the dollar, an increase in the number of dollars needed to purchase one unit of foreign exchange in a flexible rate system |
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currency appreciation |
With respect to the dollar, a decrease in the number of dollars needed to purchase one unit of foreign exchange in a flexible rate system |
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20-3 |
Describe the purchasing power parity theory |
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arbitrageur |
Someone who takes advantage of tiny differences in the exchange rate across markets by simultaneously purchasing a currency in one market and selling it in another market |
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speculator |
Someone who buys or sells foreign exchange in hopes of profiting from fluctuations in the exchange rate over time |
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purchasing power parity theory |
The idea that the exchange rate between two countries will adjust in the long run to equalize the cost of a basket of internationally traded goods |
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flexible exchange rate |
Rate determined in foreign exchange markets by the forces of demand and supply without government intervention |
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fixed exchange rate |
Rates of exchange between currencies pegged within a narrow range and maintained by the central bank's ongoing purchases and sales of currencies |
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currency devaluation |
An increase in the official pegged price of foreign exchange in terms of the domestic currency |
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currency revaluation |
A reduction in the official pegged price of foreign exchange in terms of the domestic currency |
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20-4 |
Trace the evolution of exchange rate regimes from the gold standard to the current system |
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gold standard |
AN arrangement whereby the currencies of most countries were convertible into gold at a fixed rate |
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Internation monetary fund |
An international organization that establishes rules for maintaining the international monetary system and makes loan to countries with temporary balance-of-payments problems |
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managed float system |
An exchange rate system that combines features of freely floating rates with sporadic intervention by central banks |
