Economic Exchange and Currency Dynamics

These flashcards cover key terms and definitions related to international trade, currency values, and foreign exchange dynamics.

Balance of payments (BOP) accounts

A record of all economic transactions between a country and the rest of the world.

Current account (CA)

Measures trade in goods/services, income from abroad, and net transfers.

Trade balance

The difference between exports and imports of goods and services.

Financial account

Records the purchase and sale of financial assets between countries.

Capital account

Records smaller asset transfers, like debt forgiveness and migrant asset transfers.

Foreign exchange market

The global market where currencies are traded.

Exchange rates

The price of one currency in terms of another.

Appreciates

When a currency increases in value relative to another currency.

Depreciates

When a currency decreases in value relative to another currency.

Purchasing power parity (PPP)

The idea that currencies adjust so identical goods cost the same in different countries.

Protectionism

Policies designed to restrict imports and protect domestic industries.

Tariffs

Taxes placed on imported goods.

Import quota

A limit on the quantity of a good that can be imported.

Aggregate price level

The overall level of prices in the economy.

Net exports

The value of a country's total exports minus its total imports.

Equilibrium exchange rate

The exchange rate at which currency supply equals currency demand.

Devaluation

A government-driven decrease in the value of a currency under a fixed exchange-rate system.

Revaluation

A government-driven increase in the value of a currency under a fixed exchange-rate system.