Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
current account capital account exchange rate nominal exchange rate real exchange rate purchasing power parity appreciation (currency) depreciation (currency) fixed exchange rate flexible or floating exchange rate dollarization | Summarizes the flow of money into and out of domestic and foreign assets, including investments by foreign companies in domestic plants or subsidiaries, and other foreign holdings of U.S. assets, including mutual funds, stocks, bonds, and deposits in U.S. banks. Also included are U.S. investors’ holdings of foreign financial assets, production facilities, and other assets in foreign countries When the value of a currency falls relative to other currencies When the value of a currency rises relative to other currencies A country’s currency exchange rate is determined in international currency exchange markets, given the country’s macroeconomic policies The price of one country’s currency for another when the price levels of both countries are taken into account; important when inflation is an issue in one country; it is equal to the nominal exchange rate multiplied by the ratio of the price levels of the two countries Describes the decision of a country to adopt another country’s currency (most often the U.S. dollar) as its own official currency The rate at which one currency can be exchanged for another The rate of exchange that allows a specific amount of currency in one country to purchase the same quantity of goods in another country Includes payments for imports and exports of goods and services, incomes flowing into and out of the country, and net transfers of money Each government determines its exchange rate, then uses macroeconomic policy to maintain the rate The rate at which one currency can be exchanged for another, or just the price of one currency for another |