Unit 6 Vocab

Balance of Payments Accounts

record of a country’s capital, financial, and current accounts

Current Account

net flow of income from imports/exports

Balance of Payments on Goods and Services

recording net flow of money from imported goods/services

Merchandise trade balance (trade balance)

the net difference between import and exports of tangible goods

Financial Account

records of a country’s transactions

Foreign Exchange Market

where currencies around the world get traded for other countries’ currencies

Exchange Rates

what one thing is worth for another thing

Appreciates

garners money over time

Depreciates

loses money over time

Equilibrium Exchange Rate

currency where supply and demand are equal

Real Exchange Rate

currency where supply and demand are not equal

Purchasing Power Parity

conversion rate with the exchange of currency to equal current countries cost of life

Exchange Rate Regime

the framework a government or central bank uses to manage its currency's value relative to others

Fixed Exchange Rate

an exchange rate that does not change

Floating Exchange Rate

an exchange rate that changes based on inflation and deflation at the time

Exchange Market Intervention

when governments step in to direct the economy away from failure

Foreign Exchange Reserves

assets held by central banks

Foreign Exchange Controls

imposed regulation by governments

Devaluation

fixed exchange rate system

Revaluation

unfixed exchange rate system