Understanding the Balance of Payments and Exchange Rates in an Open Economy, Quizzes of Managerial Economics

Download Understanding the Balance of Payments and Exchange Rates in an Open Economy and more Quizzes Managerial Economics in PDF only on Docsity! TERM 1 Open Economy DEFINITION 1 An economy that has interactions in trade or finance with other countries. TERM 2 Closed Economy DEFINITION 2 An economy that has no interactions in trade or finance with other countries. TERM 3 Balance of Payments DEFINITION 3 The record of a country's trade with other countries in goods, services, and assets. TERM 4 Current Account DEFINITION 4 The part of the countries balance of payments that records a country's net exports, net income on investments, and net transfers. TERM 5 Balance of Trade DEFINITION 5 The difference between the value of the goods a country exports and the value of the goods a country imports. TERM 6 Financial Account DEFINITION 6 The part of the balance of payments that records purchases of assets a country has made abroad and foreign purchases of assets in the country. TERM 7 Net Foreign Investment DEFINITION 7 The difference between capital outflows from a country and capital inflows, also equal to the net foreign direct investment plus net foreign portfolio investment. TERM 8 Capital Account DEFINITION 8 The part of the balance of payments that records relatively minor transactions, such as migrants' transfers, and sales and purchases ofnon-producednon-financialassets. TERM 9 Nominal Exchange Rate DEFINITION 9 The value of one country's currency in terms of another country's currency. TERM 10 3 Sources of Foreign Currency Demand for the U.S. Dollar DEFINITION 10 Foreign firms and households that want to buy goods and servicesproducedin the U.S. Foreign firms and households that want to invest in the U.S. either through Foreign Direct Investment or Foreign PortfolioInvestment. Currencytraderswho believe that the value of the dollar in the future will be greater than its value today.