AP MACROECONOMICS: UNIT 6 OPEN ECONOMY - INTERNATIONAL TRADE AND FINANCE

Balance of Payments

Balance of Payments

In international trade, the difference between a country's debits (money outflows) and credits (money inflows) for a given time period.

Current Account (CA)

The sum of a country's net exports, net foreign (investment) income, and net transfers.

Capital and Financial Account (CFA)

The net sum of capital and financial investment into a country from abroad and out of that country to invest in real and financial assets abroad.

Credit

In international trade, funds coming into a country from another to buy goods and services.

Debit

In international trade, funds leaving one country to buy goods and services in another country.

Trade Deficit

The condition when the value of a country's total imports exceeds its total exports.

Trade Surplus

The condition when the value of a country's total exports exceeds its total imports.

Exchange Rates

The price of one country's currency in terms of a foreign currency; example 1 U.S. dollar = 100 Japanese yen.

Appreciate

In currency exchange, the rise/increase in value of a currency relative to another currency; the currency becomes more valuable, strengthening.

Depreciate

In currency exchange, the fall/decrease in value of a currency relative to another; the currency becomes less valuable, weakening.

Foreign Exchange Market (FOREX)

The global market for currency trading, where the exchange rate between two currencies is determined by the forces of supply and demand for each currency; currencies are bought and sold in order to facilitate trade.

Equilibrium Exchange Rate

In the foreign exchange market, the price level of a currency in terms of another currency where the quantity supplied is equal to the quantity demanded.

Capital Outflow

The movement of assets (capital) from one country to another; funds leaving/flowing out.