 | Economics 14/e McConnell | |||||
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balance of payments
(See International balance of payments.)
current account
The section in a nation’s international balance of payments which records its exports and imports of goods and services its net investment income and its net
transfers.
trade balance
The export of goods (or goods and services) of a nation less its imports of goods (or goods and services).
balance on goods and services
The exports of goods and services of a nation less its imports of goods and services in a year.
balance on current account
The exports of goods and services of a nation less its imports of goods and
services plus its net investment income and net transfers in a year.
capital account
The section of a nation’s international balance of payments statement in which the foreign purchases of assets in the United States (producing money capital inflows) and U.S. purchases of assets abroad (producing money capital outflows of that nation) are recorded.
balance on capital account
The capital inflows of a nation less its capital outflows
official reserves
Foreign currencies owned by the central bank of a nation.
balance of payments deficits and surpluses
The amount by which the sum of the balance on current account and the balance on the capital account is negative in a year.
flexible or floating exchange rate system
A rate of exchange determined by the international demand for and supply of a nation's money; a rate free to rise or fall (or float).
fixed exchange-rate
A rate of exchange which is set in some way and hence prevented from rising or falling with changes in currency supply and demand.
system
A regularly interacting or interdependent group of items forming a unified whole.
purchasing power parity theory
The idea that exchange rates between nations equate the purchasing power of various currencies; exchange rates between any two nations adjust to reflect the price-level differences between the countries.
gold standard devaluation
When a government lowers the value of its currency relative to the value of gold. For example, it may devalue its currency from 1 unit = 25 ounces of gold to 1 unit = 10 ounces. This action is deliberately taken to make imports more expensive (and exports less expensive to overseas markets), thus increasing the demand for domestic goods and get the economy moving again. The Great Depression in the 1930s led to the collapse of the gold standard system.
Bretton Woods system
The international monetary system developed after World War II in which adjustable pegs were employed the International Monetary Fund helped to stabilize foreign exchange rates and gold and the dollar were used as international monetary reserves.
International Monetary Fund
The international association of nations which was formed after World War
II to make loans of foreign monies to nations with temporary payments deficits and until the early 1970s to administer the adjustable pegs; it now mainly makes loans to nations facing possible defaults on private and government loans.
managed floating exchange rates
An exchange rate which is allowed to change (float) as a result of changes in currency supply and demand but at times is altered (managed) by governments via their buying and selling of particular currencies.
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