Studied by 3 peopleAppreciation
________: as exports increase, demand for the currency increases and the value of the currency increases.
Reserve assets
________: foreign currencies purchased to be used by the central bank in its monetary policy.
Expenditure
________ reducing policies: policies aim to reduce the real spending of consumers.
Current account deficit
________: the country is a net borrower to the rest of the world.
Capital transfers
________: debt forgiveness, non- life insurance claims and investment grants.
Components of BOP
________: total current account must balance with total of capital and financial accounts.
domestic consumption
Lower ________ and investment: currency appreciates, imports will become more affordable compared to domestic products so consumption of domestic products falls.
Direct investment
investment in physical capital usually undertaken by multinational corporations
Portfolio investment
purchase of shares and bonds
Reserve assets
foreign currencies purchased to be used by the central bank in its monetary policy
Capital transfers
debt forgiveness, non-life insurance claims and investment grants
Non-financial asset transfers
purchase or use of natural resources that have no been produced
Current transfers
transfers of money where nothing is received in return
Components of BOP
total current account must balance with total of capital and financial accounts
Balance of payments
record financial transcripts made between consumers, businesses and the government in one country with others
Balance of payments
record financial transcripts made between consumers, businesses and the government in one country with others
Current transfers
transfers of money where nothing is received in return
Non-financial asset transfers
purchase or use of natural resources that have no been produced
Portfolio investment
purchase of shares and bonds
Direct investment
investment in physical capital usually undertaken by multinational corporations
Current account balance
sum of capital account and financial account balances
Current account surplus
indicates that the country is a net leader to the rest of the world
Current account deficit
the country is a net borrower to the rest of the world
Reduced export competitiveness
currency appreciates, in a floating exchange rate, exports become comparatively more expensive as demand for exports fall
Lower domestic consumption and investment
currency appreciates, imports will become more affordable compared to domestic products so consumption of domestic products falls
Expenditure switching policies
devaluing exchange rate, tariffs and policies to reduce inflation
Expenditure reducing policies
policies aim to reduce the real spending of consumers
Supply-side policies
to improve the countrys productivity in order to improve its exports competitiveness
Note 
Flashcard (94)