Term
| Balance of payments accounts |
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Definition
| A summary of the country's transactions with other countries |
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Term
| Balance of payments on current account/current account |
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Definition
| Its balance of payments on goods & services plus net international transfer payments & factor income |
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Term
| Balance of payments on goods & services |
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Definition
| The difference between a country's exports & its imports during a given period |
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Term
| Merchandise trade balance/trade balance |
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Definition
| The difference between a country's exports & imports of goods |
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Term
| Balance of payments on financial account/financial account |
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Definition
| The difference between a country's sales of assets to foreigners & its purchases of assets from foreigners during a given period |
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Term
| The _____, which tracks a country's international transactions, is composed of the balance of payments on current account, or the current account, plus the balance of payments on financial account, or the financial account |
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Definition
| Balance of payment accounts |
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Term
| The most important component of the current account is the _____, which itself includes the merchandise trade balance, or the trade balance |
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Definition
| Balance of payments on goods & services |
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Term
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Definition
| Where currencies are traded |
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Term
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Definition
| The prices at which currencies trade |
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Term
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Definition
| When a currency becomes more valuable in terms of other currencies |
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Term
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Definition
| When a currency becomes less valuable in terms of other currencies |
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Term
| Equilibrium exchange rate |
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Definition
| The exchange rate at which the quantity of a currency demanded in the foreign exchange market is equal to the quantity supplied |
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Term
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Definition
| Exchange rates adjusted for international differences in aggregate price levels |
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Term
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Definition
| The nominal exchange rate at which a given basket of goods and services would cost the same amount in each country |
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Term
| Currencies are traded in the _____, which determines exchange rates |
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Definition
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Term
| To avoid confusion, economists say that a currency _____ or _____ |
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Definition
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Term
| The _____ matches the supply & demand for currencies on the foreign exchange market |
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Definition
| Equilibrium exchange rate |
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Term
| To take account of differences in national price levels, economists calculate _____ |
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Definition
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Term
| _____ is the nominal exchange rate that equalizes the price of a market basket in the two countries |
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Definition
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Term
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Definition
| A rule governing policy toward the exchange rate |
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Term
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Definition
| When the government keeps the exchange rate against some other currency at or near a particular target |
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Term
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Definition
| When the government lets the exchange rate go wherever the market takes it |
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Term
| Exchange market intervention |
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Definition
| Government purchases or sales of currency in the foreign exchange market |
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Term
| Foreign exchange reserves |
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Definition
| Stocks of foreign currency that governments maintain to buy their own currency on the foreign exchange market |
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Term
| Foreign exchange controls |
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Definition
| Licensing systems that limit the right of individuals to buy foreign currency |
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Term
| Countries choose different _____ |
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Definition
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Term
| The two main regimes are _____ and _____ |
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Definition
| Fixed exchange rates; floating exchange rates |
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Term
| Exchange rates can be fixed through _____, using foreign exchange reserves |
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Definition
| Exchange market intervention |
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Term
| Countries can also use domestic policies to shift supply & demand in the foreign exchange market (usually monetary policy), or they can impose ____ |
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Definition
| Foreign exchange controls |
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Term
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Definition
| A reduction in the value of a currency that is set under a fixed exchange rate regime |
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Term
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Definition
| An increase in the value of a currency that is set under a fixed exchange rate regime |
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Term
| _____ or ____ can help reduce surpluses or shortages in the foreign exchange market & can increase or reduce aggregate demand |
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Definition
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