Unit 6 Vocabulary - AP Econ

Balance of Payments Accounts

Balance of Payments Accounts is a systematic record of all economic transactions between residents of a country and the rest of the world over a specific period.

Current Account

The Current Account is a component of the Balance of Payments that records a country's transactions related to goods, services, income, and current transfers.

Balance of Payments on Goods and Services

Balance of Payments on Goods and Services is part of the Current Account that tracks the trade in physical goods and the provision of services.

Merchandise trade balance (trade balance)

Merchandise trade balance (trade balance) is the difference between the value of a country's exports and imports of goods.

Financial Account

The Financial Account is a component of the Balance of Payments that records transactions involving financial assets and liabilities.

Foreign Exchange Market

The Foreign Exchange Market is a global marketplace for buying and selling national currencies against one another.

Exchange Rates

Exchange Rates are the rates at which one currency can be exchanged for another.

Appreciates

Appreciates refers to an increase in the value of a currency relative to other currencies.

Depreciates

Depreciates refers to a decrease in the value of a currency relative to other currencies.

Equilibrium Exchange Rate

Equilibrium Exchange Rate is the exchange rate at which the demand for a currency equals the supply.

Real Exchange Rate

Real Exchange Rate is an adjusted exchange rate that takes into account the price levels between two countries.

Purchasing Power Parity

Purchasing Power Parity is an economic theory which states that exchange rates should adjust so that identical goods cost the same in different countries.

Exchange Rate Regime

Exchange Rate Regime is the way a country manages its currency in relation to other currencies.

Fixed Exchange Rate

Fixed Exchange Rate is a regime where the currency value is tied or pegged to another major currency or gold.

Floating Exchange Rate

Floating Exchange Rate is a regime where the currency value is determined by market forces without direct government or central bank intervention.

Exchange Market Intervention

Exchange Market Intervention is the act of a government or central bank influencing the value of its currency in the foreign exchange market.

Foreign Exchange Reserves

Foreign Exchange Reserves are assets held by a central bank in foreign currencies, used to back liabilities and influence monetary policy.

Foreign Exchange Controls

Foreign Exchange Controls are restrictions or regulations imposed by a government on the purchase and sale of currencies.

Devaluation

Devaluation is the reduction in the value of a currency within a fixed exchange rate system.

Revaluation

Revaluation is the increase in the value of a currency within a fixed exchange rate system