Contemporary Challenges in International Economics - Vocabulary

Flashcards covering key vocabulary and concepts from the lecture on contemporary challenges in international economics.

Financial Integration

The sum of all capital inflow and outflow of a country, as a share of the country’s GDP.

Benefits of Globally Integrated Financial Markets

Channeling resources to productive and efficient uses, fostering entrepreneurship and innovation, transferring wealth through time, financing international trade and enhancing risk-sharing.

Balance of Payments

An accounting system that registers all international transactions of a country in a given year.

Current Account

Registers entries that affect only the current period and is divided into the goods and services account and the income account.

Goods and Services Account

Registers the imports and exports of physical items.

Income Account

Registers the payments of income, which may be primary (payment to factors of production) or secondary (donations).

Capital Account

Registers all transactions of non-financial and non-produced assets.

Financial Account

Registers all transactions of financial assets and is divided into direct investment, portfolio investment, financial derivatives, other investment and reserve assets.

Direct Investment

The acquisition or sale of assets that result in the ownership or the managerial control of a foreign firm.

Portfolio Investment

Registers transactions in equity securities.

Financial Derivatives

Transactions in assets whose value depends on the value of other assets.

Other Investment

All operations of currency, deposits, and trade credits are registered here.

Reserve Assets Account

Any type of assets from the other categories that belong to the monetary authority (central bank).

Financial Account

How you pay or get paid for all that is registered in the current account.

Current Account Deficit

When a country is importing or making more income payments than exporting or receiving income.

Current Account Surplus

When a country is exporting more than importing, or receiving more income than paying.

Net External Position

The accumulation of all borrowing and lending done over the years.

Gross Domestic Product (GDP)

Measures all that is produced within the frontier of the country.

Gross National Income (GNI)

Captures the value of production that belongs to the residents of a country.

Positive Current-Account Balance

Occurs when income is greater than aggregate expenditures.

Negative Current Account Balance

Occurs when the national income is smaller than expenditures.

Liquidity Trap

A situation when there is so much liquidity that interest rates go down to zero.

US Exorbitant Privilege

The American advantage where it borrows at much lower interest rates than the rates it usually receives from lending to other countries.

Dark Matter

Matter that is estimated based on gravitational forces, but that is different than what you measure by direct observation in the case of The United States income balance.

Triffin Dilemma

The building tension in world markets that led to the collapse of the Bretton Woods system.

Global Value Chains

The recent technological innovations have caused profound changes in international trade.