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Balance of Payments
-A country must keep large quantities of foreign-currency on hand
for stabilization needs.
-Monetary policy used to stabilize the exchange rate is diverted
from other policy goals.
-Foreign exchange controls distort incentives for importing and
exporting goods and services.
sales and purchases of assets between governments
also includes private sales and purchases
Currency Appreciation and Depreciation
Current Account (CA) + Financial Accounts (FA) =0
the total flows into a country and total flows out must equal zero
Fixed Exchange Rates:
When government keeps the exchange rate against some other currency at or near a particular target.
Floating Exchange Rates:
When government lets the exchange rate go wherever the market takes it.
Appreciation:
An increase in the value of one currency in terms of another.
Depreciation:
The loss of value of a country's currency with respect to one or more foreign reference currencies.
the balance of payments on goods and services plus factor income and international transfers
Questions
-Differentials in Inflation
-Differentials in Interest Rates
-Current-Account Deficits
-Public Debt
-Terms of Trade
-Political Stability and Economic Performance
Euro 0.731240
British Pound 0.606815
Indian Rupee 62.665001
Australian Dollar 1.149670
Canadian Dollar 1.108200
Emirati Dirham 3.672500
Swiss Franc 0.895152
Chinese Yuan 6.048950
Malaysian Ringgit 3.333200
New Zealand Dollar 1.214951
Foreign Exchange Market:
International transactions require a market in which currencies
can be exchanged for each other.
Exchange Rates:
The prices at which currencies trade, as
determined by the foreign exchange market.
INTERNATIONAL CAPITAL FLOW
More Words
Works Cites
Financial Market- where traders buy and sell stocks, bonds, derivatives, foreign exchange and commodities.
Ex: New York Stock Exchange
Goods Market- Markets in which outputs of goods and services are sold, also called product markets.
More Words
Easy Terms
Capital flows-movement of money for the purpose of investment, trade or business production
Currency- a system of money in general use in a particular country ex: US dollars, pesos, euros
Exports- goods or services sent to another country for sale. ex: ammunitions
Imports- bring goods or services into a country from abroad for sale. ex: oil
Net Exports: difference of exports and imports