AP Macro Unit 6 Vocab

Balance of Payment Accounts

Summary of a country's transactions with other countries. Includes current and financial accounts.

Current Accounts

The balance of payments on goods and services plus net international transfer payments (sent by individual people to others) and factor income (money made in one country that belongs to another).

Financial Account

The difference between a country's sales of its assets to foreigners and its purchases of assets from foreigners during a given period.

Trade Balance

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

Balance of Payments on Goods and Services

The difference between a country's exports and its imports during a given period.

Relationship Between Current and Financial Account

CA = -FA. Inverse.

Capital Inflows

Foreign savings that can be used to finance domestic spending.

Loanable Funds Market Between Two Countries

SRAS shifts left in country with lower interest rate, shifts right in country with higher interest rate.

Foreign Exchange Market

Where currencies are exchanged

Exchange Rates

The prices at which currencies are traded

Appreciation

When a currency becomes more valuable in terms of other currencies. Takes more of one currency to "buy" the same amount of another.

Depreciation

When a currency becomes less valuable in terms of other currencies. Takes less of one currency to "buy" the same amount of another.

Equilibrium Exchange Rate

The exchange rate at which the quantity of a currency demanded in the foreign exchange market is equal to the quantity supplied.

Real Exchange Rates

Exchange rates adjusted for international differences in aggregate price levels.

Interactions of Foreign Exchange Market

Different curves in different markets shift the same way.

Current Trends of US Interactions with Trading Partners

Deficit on the current account and surplus on the financial account

Purchasing Party Parity

The nominal exchange rate between two countries at which a given basket of goods and services would cost the same amount in each country.