International Trade and Balance of Payments Vocabulary

Vocabulary and concepts based on Country X balance of payments data, currency exchange mechanics, and international capital flows.

Country X Current Account Balance (2018)

The sum of exports ($235$ million), imports ($-300$ million), net income from abroad ($20$ million), and net unilateral transfers ($-15$ million), totaling a deficit of $-60$ million.

Net Financial Capital Inflow

A condition that occurs when a country has a current account deficit, requiring it to attract foreign capital to balance its international transactions.

Current Account Credit Entry

A transaction that results in a flow of money into a country, such as the exports of consumer goods.

Financial Account Transaction

Transactions involving the purchase or sale of physical and financial assets, such as a Canadian purchasing a $50$ million Chinese factory, which are excluded from the current account.

Research and Development Tax Credits

Policy measures, such as an increase in tax credits for business spending on R&D, that are designed to promote long-run economic growth.

Currency Appreciation Effects

Results in a decrease in the nation's exports, an increase in imports, and a subsequent decrease in aggregate demand.

Causes of Financial Capital Inflow

Economic changes that attract foreign investment, such as an increase in the federal budget deficit which can lead to higher interest rates.

Effect of Increased Domestic Income on Net Exports

An increase in domestic residents' income typically leads to a decrease in net exports because residents buy more imports.

Effect of Increased Domestic Income on Currency Value

As seen in the case of Angola's kwanza, an increase in domestic income leads to a depreciation of the currency due to increased demand for foreign goods and currency.

Net Unilateral Transfers

A component of the current account that includes foreign aid, such as donating $1$ million in first aid supplies, or remittances, such as a worker sending $1,000$ to their home country.