Economics Balance Of Payments Study Cards

Enhance Your Learning with Economics - Balance of Payments Flash Cards for quick understanding



Balance of Payments

A record of all economic transactions between the residents of a country and the rest of the world over a specific period of time.

Current Account

The part of the balance of payments that records a country's transactions in goods, services, primary income, and secondary income with the rest of the world.

Capital Account

The part of the balance of payments that records a country's transactions in financial assets and liabilities with the rest of the world.

Financial Account

The part of the balance of payments that records a country's transactions in financial assets and liabilities, excluding those included in the capital account.

Trade Balance

The difference between the value of a country's exports and the value of its imports of goods and services.

Foreign Direct Investment

Investment made by a company or individual in one country into business interests located in another country.

Exchange Rates

The rate at which one currency can be exchanged for another currency.

Balance of Payments Surplus

When a country's exports of goods, services, and financial assets exceed its imports of goods, services, and financial assets.

Balance of Payments Deficit

When a country's imports of goods, services, and financial assets exceed its exports of goods, services, and financial assets.

International Reserves

Foreign currency assets held by a central bank or monetary authority to support the country's balance of payments and stabilize its currency.

Balance of Payments Adjustment

The process by which a country's balance of payments is brought back into equilibrium through changes in exchange rates, interest rates, and other economic variables.

Current Account Surplus

When a country's current account balance is positive, indicating that it is earning more from its exports of goods, services, and income than it is spending on imports.

Current Account Deficit

When a country's current account balance is negative, indicating that it is spending more on imports of goods, services, and income than it is earning from its exports.

Capital Account Surplus

When a country's capital account balance is positive, indicating that it is receiving more financial inflows than outflows.

Capital Account Deficit

When a country's capital account balance is negative, indicating that it is experiencing more financial outflows than inflows.

Financial Account Surplus

When a country's financial account balance is positive, indicating that it is receiving more financial inflows than outflows.

Financial Account Deficit

When a country's financial account balance is negative, indicating that it is experiencing more financial outflows than inflows.

Fixed Exchange Rate

An exchange rate regime where the value of a country's currency is fixed to the value of another currency or a basket of currencies.

Floating Exchange Rate

An exchange rate regime where the value of a country's currency is determined by market forces of supply and demand.

Managed Exchange Rate

An exchange rate regime where the value of a country's currency is allowed to fluctuate within a certain range, but with intervention from the central bank to stabilize the exchange rate.

Devaluation

A deliberate downward adjustment in the value of a country's currency relative to another currency or a standard, usually undertaken to improve competitiveness in international trade.

Revaluation

A deliberate upward adjustment in the value of a country's currency relative to another currency or a standard, usually undertaken to reduce inflationary pressures or to correct an undervalued currency.

Foreign Exchange Reserves

Foreign currency assets held by a central bank or monetary authority to support the country's exchange rate and ensure stability in the foreign exchange market.

Currency Appreciation

An increase in the value of a country's currency relative to another currency or a standard, resulting in higher purchasing power of the currency.

Currency Depreciation

A decrease in the value of a country's currency relative to another currency or a standard, resulting in lower purchasing power of the currency.

Trade Surplus

When a country's exports of goods and services exceed its imports, resulting in a positive trade balance.

Trade Deficit

When a country's imports of goods and services exceed its exports, resulting in a negative trade balance.

Terms of Trade

The ratio at which a country's exports can be exchanged for imports, indicating the relative prices of a country's exports and imports.

Trade Liberalization

The removal or reduction of barriers to international trade, such as tariffs, quotas, and other restrictions, to promote free trade and economic integration.

Protectionism

The use of trade barriers, such as tariffs, quotas, and other restrictions, to protect domestic industries from foreign competition.

Balance of Trade

The difference between the value of a country's exports and the value of its imports of goods.

Balance of Services

The difference between the value of a country's exports and the value of its imports of services.

Invisible Trade

Trade in services, such as tourism, transportation, and financial services, which are not physically tangible.

Visible Trade

Trade in goods, such as manufactured goods, agricultural products, and raw materials, which are physically tangible.

Current Account Balance

The sum of the balance of trade, balance of services, net income from abroad, and net transfers from abroad, indicating a country's overall position in international trade and payments.

Capital Account Balance

The difference between a country's capital inflows and capital outflows, indicating the net change in its ownership of foreign assets and liabilities.

Financial Account Balance

The difference between a country's financial inflows and financial outflows, indicating the net change in its ownership of financial assets and liabilities.

Official Reserves

Foreign currency assets held by a central bank or monetary authority to support the country's exchange rate and ensure stability in the foreign exchange market.

Balance of Payments Disequilibrium

A situation where a country's balance of payments is not in equilibrium, indicating a surplus or deficit that needs to be corrected through policy measures.

Exchange Rate Regime

The framework within which a country's exchange rate is determined and managed, including fixed, floating, and managed exchange rate systems.

Exchange Rate Policy

The policy decisions and actions taken by a country's central bank or monetary authority to influence the value of its currency in the foreign exchange market.

Monetary Policy

The policy decisions and actions taken by a country's central bank to control the money supply, interest rates, and inflation, influencing the overall economic conditions and stability.

Fiscal Policy

The policy decisions and actions taken by a country's government to manage its revenue and expenditure, influencing the overall economic conditions and stability.

Foreign Exchange Market

The market where currencies are bought and sold, facilitating international trade and investment by determining the exchange rates between currencies.

Foreign Exchange Rate

The price of one currency in terms of another currency, indicating the value of a currency in the foreign exchange market.

Foreign Exchange Intervention

The buying or selling of a country's currency by its central bank or monetary authority in the foreign exchange market to influence the exchange rate and stabilize the currency.

Foreign Exchange Controls

Government-imposed restrictions on the buying and selling of foreign currencies, usually to manage the country's exchange rate and control capital flows.

Currency Peg

A fixed exchange rate regime where a country's currency is tied to the value of another currency or a standard, with little or no fluctuation allowed.

Currency Basket

A weighted average of several currencies used as a reference for determining the value of a country's currency in a managed exchange rate system.

Currency Board

A monetary authority that issues a domestic currency fully backed by a foreign reserve currency, maintaining a fixed exchange rate with the reserve currency.

International Monetary Fund (IMF)

An international organization that provides financial assistance, policy advice, and technical assistance to its member countries, promoting global monetary cooperation and stability.

World Trade Organization (WTO)

An international organization that deals with the global rules of trade between nations, promoting free trade and reducing trade barriers.