Eco6: International Economics And Growth,

Front 1

what is the balance of payments of money in the international market?

Back 1

it is a statement of all international flows of money over a given period

Front 2

what is the equation for the merchandise trade balance?

Back 2

merchandise trade balance = merchandise exports - merchandise imports

Front 3

when do merchandise trade deficits and surpluses occur; what must the other factors of the trade balance do as a result?

Back 3

when there is inequality between merchandise exports and merchandise imports; the current-account or capital-account balances must balance these inequalities

Front 4

what is the equation of he current-account balance?

Back 4

current-account balance = merchandise trade balance + services balance + transfers

Front 5

what does the capital-account balance consider that the other balances do not? what is the equation of the capital-account balance?

Back 5

other types of assets that change ownership across international borders, including securities, currency, capital (like machinery), and land; capital-account balance = foreign purchases of home assets-home purchases of foreign assets

Front 6

what determines the exchange rate between two countries?

Back 6

the equilibrium at which the supply and demand of the currency meet

Front 7

what is currency depreciation?

Back 7

when a currency falls in value relative to other currencies, and it takes more units of the depreciated currency to buy a unit of another country's currency

Front 8

what effect does depreciation have on imports and exports on domestic trade?

Back 8

it decreases imports because it becomes more expensive for domestic consumers to buy foreign products; it increases exports because products become relatively less expensive for foreigners to buy

Front 9

how is a weaker currency beneficial?

Back 9

it helps exporting industries because foreign consumers are more likely to purchase the now relatively low priced domestic products; and domestic tourism increases because foreigners are more likely to come and spend their relatively more valuable money

Front 10

how is a weaker currency bad?

Back 10

importing industries purchase less because their money buys less

Front 11

what is currency appreciation?

Back 11

when a country's currency becomes stronger, and it takes fewer units of that currency to buy a unit of another country's currency

Front 12

what effect does appreciation have on imports and exports on domestic trade?

Back 12

domestic industries export less because, given the new strength of their currency, their products are more expensive considering the weaker currency of other countries; imports increase because domestic currency is relatively more valuable

Front 13

what effect does depreciation have on trade deficits and surpluses?

Back 13

deficits decrease and surpluses increase because exports are greater than imports

Front 14

what effect does appreciation have on trade deficits and surpluses?

Back 14

deficits increase and surpluses decrease because imports are greater than exports

Front 15

regarding dollar speculation, how might the exchange rate equilibrium change?

Back 15

speculation that the dollar will increase in value will result in dollar appreciation

Front 16

regarding existing domestic bumper crops, how might the exchange rate equilibrium change?

Back 16

if japan, say, has a bumper crop of food, it has decreased desire to import and will demand fewer dollars, causing the dollar to depreciate

Front 17

regarding interest rates, how might the exchange rate equilibrium change?

Back 17

if US interest rates increase relative to Japan, depositors will increase the demand for dollars in order to put their funds into US banks, causing the dollar to appreciate

Front 18

regarding domestic US prices, how might the exchange rate equilibrium change?

Back 18

if prices are rising relatively fast in the US, the demand for dollars will decrease and the supply of dollars will increase as consumers purchase more goods elsewhere, causing the dollar to depreciate

Front 19

regarding incomes in two respective countries, how might the exchange rate equilibrium change?

Back 19

if incomes in japan increase relative to those in the US, japanese consumers will tend to spend more, increasing the demand for US exports and currency, causing the dollar to appreciate

Front 20

what is a fixed exchange rate, who is it set by, and why?

Back 20

-a fixed exchange rate causes changes in demand to only affect the quantity of dollars purchased, not the actual supply
-it is set by the central bank of the US
-it keeps the price for the dollar the same regardless of foreign demand

Front 21

what is a flexible exchange rate?

Back 21

it's when the money supply curve is perfectly elastic, causing any change in domestic currency demand to result in a significantly corresponding change

Front 22

what is a managed exchange rate?

Back 22

when both the currency supply curve is positively sloped and the demand curve is negatively sloped, still resulting in exchange rate changes as is the case with the flexible rate, but the effects are dampened by the positive slope of the supply curve

Front 23

how can economic growth be modeled on graphs?

Back 23

it can either be shown as a rightward shift in the supply curve, or outward movement of the production possibilities frontier

Front 24

regarding human capital, how is growth affected?

Back 24

if there is increased investments in education, training, practice and experience, there is increased investment in human capital, fostering a more skilled and productive economy

Front 25

regarding physical capital, how is growth affected?

Back 25

if firms invest more money in physical capital, like a farmer buying more tractors for his farm, then there is an increase in investment of physical capital, making the farmer more productive

Front 26

regarding technology, how is growth affected?

Back 26

if research and development efforts increase, then the improvements in technology that result will allow producers to be more efficient and productive

Front 27

regarding resource utilization, how is growth affected? (reference a particular curve)

Back 27

according to the production possibilities curve, a firm that produces along the production possibilities curve is allocating its resources efficiently; enhanced resource utilization increases productivity

Front 28

how can the government bolster growth?

Back 28

fiscal support for education systems, vocational training, research grants, and development programs

Front 29

how can the central bank bolster growth?

Back 29

by lowering interest rates, the bank allows firms to increase investments in capital

Front 30

what is an arithmetic rate?

Back 30

a consistent change over a certain period

Front 31

what is a geometric rate?

Back 31

an increase by an ever-growing proportion over a certain period

Front 32

what is critical about economic growth regarding the arithmetic rate of resources and food and the geometric rate of population?

Back 32

resource and food growth increases at an arithmetic rate, meaning it increases at an even clip; however, population increases at a geometric rate, meaning it increases at an exponential, ever-growing rate. essentially, it is crucial for economies to maximize resource allocation so as to lessen the burden of scarcity brought about by these two differing rates