Chapter 8 - The Open Economy: International Trade and Finance

International transactions

________ necessitate the existence of a market- the foreign exchange market- where currencies can be swapped for one another.

power parities

Purchasing ________ are commonly calculated by estimating the cost of purchasing broad market baskets comprising a variety of products and services, such as autos and food, as well as housing and telephone calls.

Exchange rates

________, or the prices at which currencies trade, are determined by this market.

Debtors

Countries that owe money to the rest of the world

Creditors

Countries that owe money to the rest of the world) (countries to which the rest of the world owes money

 equilibrium exchange rate

The term, ________, refers to the exchange rate at which the quantity of U.S. dollars demanded in the foreign exchange market is equal to the quantity of U.S. dollars supplied.