19.6 KEY TERMS

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.

  1. Purchasing power parity
    Depreciate
    Balance of payments on current account (current account)
    Fixed exchange rate
    Revaluation
    Appreciate
    Devaluation
    Foreign exchange reserves
    Balance of payments accounts
    Balance of payments on goods and services
    Balance of payments on financial account (financial account)
    Real exchange rate
    Floating exchange rate
    Exchange rates
    Exchange market intervention
    Merchandise trade balance (trade balance)
    Foreign exchange controls
    Equilibrium exchange rate
    Exchange rate regime
    Foreign exchange market
    a summary of a country’s transactions with other countries, including two main elements: the balance of payments on current account and the balance of payments on financial account.
    the difference between a country’s exports and imports of goods alone—not including services.
    the difference between the value of exports and the value of imports during a given period.
    a rule governing policy toward the exchange rate.
    an exchange rate regime in which the government lets market forces determine the exchange rate.
    the exchange rate at which the quantity of a currency demanded in the foreign exchange market is equal to the quantity supplied.
    the nominal exchange rate at which a given basket of goods and services would cost the same amount in each country.
    a fall in the value of one currency in terms of other currencies.
    the market in which currencies can be exchanged for each other.
    international transactions that involve the sale or purchase of assets, and therefore create future liabilities.
    stocks of foreign currency that governments can use to buy their own currency on the foreign exchange market.
    an exchange rate regime in which the government keeps the exchange rate against some other currency at or near a particular target.
    licensing systems that limit the right of individuals to buy foreign currency.
    an increase in the value of a currency that is set under a fixed exchange rate regime.
    the price at which currencies trade, determined by the foreign exchange market.
    >the exchange rate adjusted for international differences in aggregate price levels.
    government purchases or sales of currency in the foreign exchange market.
    a reduction in the value of a currency that is set under a fixed exchange rate regime.
    a rise in the value of one currency in terms of other currencies.
    transactions that don’t create liabilities; a country’s balance of payments on goods and services plus net international transfer payments and factor income.
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