Balance of Payments and International Monetary System

Flashcards covering key terms and concepts from the lecture on Balance of Payments and International Monetary System.

Balance of Payments (BOP)

A statement of all economic transactions between residents of a nation and the rest of the world during a period, usually one year.

Current Account

Records transactions related to export and import of goods, services, unilateral transfers, and international incomes.

Balance of Trade (BOT)

The difference between a country's imports and its exports; largest component of the balance of payments.

Capital Account

Records transactions that change the ownership of assets or liabilities between residents of a country and non-residents.

Deflation

A decrease in the general price level of goods and services; a monetary measure to correct balance of payments.

Devaluation

Deliberate lowering of a country's currency value against foreign currencies, often applied in response to adverse balance of payments.

International Monetary System (IMS)

A system of internationally agreed rules, conventions, and institutions facilitating international trade and capital movement.

Flexible Exchange Rate

A currency valuation determined by market forces, allowing for government intervention to manage volatility.

Gresham’s Law

An economic principle stating that bad money drives out good money in circulation when both types are accepted as legal tender.

Bretton Woods Agreement

A 1944 meeting that established a postwar international monetary system, leading to the creation of the IMF and World Bank.

Special Drawing Rights (SDRs)

Reserve assets created by the IMF, allocated to member countries for settling international payments.