Balance of payments accounts Balance of payments on the current account (the current account) Balance of payments on goods and services Merchandise trade balance (trade balance) Balance of payments on the financial account (the financial account) Foreign exchange market Exchange rates Appreciates Depreciates Equilibrium exchange rate Real exchange rate Purchasing power parity Exchange rate regime Fixed exchange rate Floating exchange rate Exchange market intervention Foreign exchange reserves Foreign exchange controls Devaluation Revaluation Protectionism Tariffs Import quota | occurs when a currency becomes more valuable in terms of other currencies. a rule governing policy toward the exchange rate. an exchange rate regime in which the government keeps the exchange rate against some other currency at or near a particular target. the difference between a country’s exports and imports of goods. an increase in the value of a currency that is set under a fixed exchange rate regime. the prices at which currencies trade. a limit on the quantity of a good that can be imported within a given period. a country’s balance of payments on goods and services plus net international transfer payments and factor income. taxes on imports. stocks of foreign currency that governments maintain to buy their own currency on the foreign exchange market. occurs when the value of an asset is reduced by wear, age, or obsolescence or when a currency becomes less valuable in terms of other currencies. (between two countries’ currencies) the nominal exchange rate at which a given basket of goods and services would cost the same amount in each country. licensing systems that limit the right of individuals to buy foreign currency. the difference between a country’s sales of assets to foreigners and its purchases of assets from foreigners during a given period. the market in which currencies are traded. a summary of a country’s transactions with other countries. an exchange rate regime in which the government lets the exchange rate go wherever the market takes it. the exchange rate at which the quantity of a currency demanded in the foreign exchange market is equal to the quantity supplied. exchange rates adjusted for international differences in aggregate price levels. a reduction in the value of a currency that is set under a fixed exchange rate regime. the practice of limiting trade to protect domestic industries. government purchases or sales of currency in the foreign exchange market. the difference between the value of a country’s exports and the value of its imports during a given period. |