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Balance of Payments and Exchange Rates
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1
Question
What is the Balance of Payments Accounts?
Page 1
Answer
Record of all economic transactions between a country and the rest of the world, split into the current account and financial account.
2
Question
What does the Current Account measure?
Page 1
Answer
Flows of goods, services, income, and current transfers between a country and other nations.
3
Question
What is the Balance of Payments on Goods and Services?
Page 1
Answer
Difference between a country's exports and imports of goods and services.
4
Question
What is the Merchandise Trade Balance (Trade Balance)?
Page 1
Answer
Difference between exports and imports of physical goods only (excludes services).
5
Question
What does the Financial Account record?
Page 1
Answer
Transactions involving purchase or sale of financial assets between a country and the rest of the world.
6
Question
What is the Foreign Exchange Market?
Page 1
Answer
Global market where currencies are traded and exchange rates are determined.
7
Question
What are Exchange Rates?
Page 1
Answer
Price of one currency in terms of another.
8
Question
What does it mean for a currency to Appreciate?
Page 1
Answer
When a currency increases in value relative to another currency.
9
Question
What does it mean for a currency to Depreciate?
Page 1
Answer
When a currency decreases in value relative to another currency.
10
Question
What is the Equilibrium Exchange Rate?
Page 1
Answer
Exchange rate at which quantity of a currency demanded equals quantity supplied.
11
Question
What is the Real Exchange Rate?
Page 1
Answer
Exchange rate adjusted for differences in price levels between countries.
12
Question
What is Purchasing Power Parity (PPP)?
Page 1
Answer
Theory that exchange rates adjust so identical goods cost the same in different countries.
13
Question
What is an Exchange Rate Regime?
Page 2
Answer
A country's policy on how its exchange rate is determined.
14
Question
What is a Fixed Exchange Rate?
Page 2
Answer
System where a government commits to keep its currency at a specific value.
15
Question
What is a Floating Exchange Rate?
Page 2
Answer
System where currency value is determined by supply and demand.
16
Question
What is Exchange Market Intervention?
Page 2
Answer
Government or central bank buying/selling currencies to influence exchange rates.
17
Question
What are Foreign Exchange Reserves?
Page 2
Answer
Foreign currencies and assets held by a central bank to stabilize its currency.
18
Question
What are Foreign Exchange Controls?
Page 2
Answer
Government restrictions on currency trading or capital flows.
19
Question
What is Devaluation?
Page 2
Answer
Government-initiated decrease in currency value under a fixed exchange rate.
20
Question
What is Revaluation?
Page 2
Answer
Government-initiated increase in currency value under a fixed exchange rate.