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.
trade deficit trade surplus balance of payments capital surplus current account capital account exchange rate appreciation depreciation nominal exchange rate real exchange rate purchasing power parity (PPP) theorem law of one price floating exchange rate fixed exchange rate dollarization dirty, or managed, float | an increase in the price of one currency in terms of another currency. a foreign country’s use of the U.S. dollar as its currency. the principle that if trade were free, then identical goods should sell for about the same price throughout the world. the price of one currency in terms of another currency. the annual difference that results when the value of a country’s imports exceeds the value of its exports. a currency whose value is not fixed but for which governments will intervene extensively in the market to keep its value within a certain range. the principle that the real purchasing power of money should be roughly the same, whether it is spent at home or converted into another currency and spent abroad. (also known as a pegged exchange rate) an exchange rate based on the promise of a government or central bank to convert its currency into another currency at a fixed (set) rate. in the balance of payments, the account that measures changes in foreign ownership of domestic assets, including financial assets like stocks and bonds as well as physical assets. the rate at which you can exchange the goods and services of one country for the goods and services of another. an exchange rate determined primarily by market forces. the excess that exists when the inflow of foreign capital into a country is greater than the outflow of domestic capital to other nations. in the balance of payments, the sum of the balance of trade, net income on capital held abroad, and net transfer payments. a decrease in the price of a currency in terms of another currency. a yearly summary of all the economic transactions between residents of one country and residents of the rest of the world. the annual difference that results when the value of a country’s exports exceeds the value of its imports. the rate at which you can exchange one currency for another. |