Economics - Balance of Trade and Currency Exchange

Flashcards covering key economics concepts related to balance of trade, currency exchange, and trade policies.

Balance of Trade

The difference between a country’s exports and imports of goods.

Trade Deficit

A situation where a nation’s imports exceed its exports, which may lead to currency overpricing or job losses.

Trade Surplus

A situation where a nation’s exports exceed its imports, resulting in increased production and higher employment.

Dumping

The practice of selling products in a domestic market at a price lower than the cost of production, harming domestic industries.

Tariffs

Taxes imposed on specific imported products, restricting trade by raising their prices.

Quotas

Limits on the amount of a product that can be imported, reducing foreign competition.

Balance of Payments

An accounting of funds flowing into and out of a country, comprising the current and capital accounts.

Exchange Rate

The value of one country’s currency in terms of another currency.

Appreciation of Currency

An increase in the value of a currency compared to other currencies, making imports cheaper but exports more expensive.

Depreciation of Currency

A decrease in the value of a currency compared to other currencies, improving export competitiveness but increasing import costs.

Managed Float Exchange Rate Regime

An exchange rate regime where supply and demand determine rates, with occasional governmental intervention.

Expansionary Monetary Policy

A policy that increases the output quantity, potentially worsening the balance of trade by discouraging exports.

Expansionary Fiscal Policy

Government spending increases or tax reductions that stimulate demand, likely causing a trade deficit.

Current Account

A component of the balance of payments that includes the trade balance and investment income.

Capital Account

A part of the balance of payments that records net foreign purchases of U.S. financial assets and capital transfers.