Chapter 19: Smart book reading 2

What do South african Exports do

What do south african imports do

SA will demand another currency not only for to import goods but what else

Whats in a nations current account

What between imports and exports are +/-

• SA exports are + because they credit, they earn and make available foreign exchange e

• SA imports are - because they debit, they reduce stock of foreign currencies

Are portfolio investments and net investments the same thing

NO

• Buying financial assets like stocks or bonds without gaining active control or management over the issuing company.

• The total amount of money a business spends on new capital assets (like machinery or buildings) minus depreciation.

Whats the balance of payments and what does it include

Sum of all transactions that take place between its residents and the residents of all foreign nations

Explain:

• Balance on gooods

• Balance on current account

• Financial account

Explain:

• Direct investments

• Portfolio investments

• Balance on financial account

• Unrecorded transactions

Explain Balance of payments surplus or deficit

Trade balance definition

basically the difference between a country’s exports and imports of goods

What are the two “pure” types of exchange-rate systems

When does balance of payments surplus occur and a deficit

• Out-payment from current and financial accounts

• Depletion of reserves (in-payment)

Define balance of payments deficit

Define balance of payments surplus

Define: Official reserves,like what are in them

Foreign currencies owned by the central bank of a nation

When currency A rises and the pound stays the same A20=1 pound to A30=1 pound, currency A has ____relative to the pound

Depreciated

(note=Not weakened in formal terms)

When does currency value appreciate in value,does it affect how many units of something you can buy?

What are the 3 generalisations when it comes to the determinants of exchange rates

• Demand of currency

• Supply of currency

• appreciates ….foreign currency

There are 5 determinants when it comes to the appreciation/depreciation of currency:

1. Change

2. Relative

3. Price

There are 5 determinants when it comes to the appreciation/depreciation of currency:

4.Rates

5.Spec

Define purchasing power parity theory

Why is this the case?

Flexible exchange rates automatically work to….what problems do they cause

fiscal policy that can maintain fixed exchange rates

government expenditures and taxes

disadvantages of using flexible exchange rates

What are the concerns with the managed float

What’s devaluation in terms of increase/decrease of stuff/the definition

What was the basis for the bretton woods international monetary system

adjustable peg system of exchange rates

What were the three main sources of needed pounds under the bretton woods system

What are the 2 implications of South African Trade deficits

And what was one of the main main reasons the Bretton woods system happened

What’s the difference between the first two