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20 Cards in this Set
- Front
- Back
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Current account |
The part of the balance of payments that primarily records trade in goods and services |
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Capital and financial account |
The part of the balance of payments that records capital flows in and out of the country |
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Current account deficit |
When imports of goods and services exceed exports |
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Current account surplus |
When exports of goods and services exceed imports |
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Balance of trade in goods |
Visible exports minus visible imports |
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Balance of trade in services |
Invisible exports minus invisible imports |
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Net income flows |
The difference between inward and outward flows of interest, profit and dividends |
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Net current transfers |
Mainly government transfers to and from overseas organisations |
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Hot money |
Volatile capital movements which take place in the foreign exchange markets due to the interest rate changes |
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Direct investment |
The acquisition of productive assets, for example, factories and offices |
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Portfolio investment |
The acquisition of financial assets, for example, shares and financial derivatives |
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Expenditure reducing policies |
Policies used to correct current account imbalances by reducing consumer spending power |
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Expenditure switching policies |
Policies used to correct current account imbalances by encouraging consumers to buy domestically produced output rather than imports |
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Marginal propensity to import |
The proportion of an increase in income that is spent on imports |
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Direct controls |
Controls on imports such as tariffs and quotas |
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Devaluation |
Reducing the value a currency in a fixed or semi-fixed exchange rate system |
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Depreciation |
In relation to currencies, reducing the value of a currency in a free-floating system |
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J-curve effect |
in the short term, a devaluation or depreciation will lead to a deterioration of the current account before it starts to improve |
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Revaluation |
Increasing the value of a currency in a fixed or semi-fixed exchange rate system |
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Appreciation |
Increasing the value of a currency in a free-floating system |
