ECON 102 - Chapter 11

These flashcards cover key terms and concepts related to exchange rates and the balance of payments in macroeconomics.

Exchange Rate

The rate at which one currency is exchanged for another.

Currency Appreciation

A rise in the exchange rate of one currency for another.

Currency Depreciation

A fall in the exchange rate of one currency for another.

Purchasing Power Parity Theory

A theory suggesting that exchange rates will change to equate the purchasing power of each currency.

Arbitrage

The practice of buying a commodity in a market where price is low and selling it where price is higher.

Balance of Payments

An accounting of a country's international transactions involving the payment and receipt of foreign currencies.

Current Account

A subcategory of the balance of payments showing the income or expenditure related to exports and imports.

Capital Account

A sub-category of the balance of payments reflecting changes in ownership of assets associated with foreign investment.

Balance of Trade

The value of a country’s exports of goods and services less the value of its imports.

Foreign Factor Income

Income that nationals receive from providing their services to another country.