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balance of payments
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The difference between a country's total payments to other countries and its total receipts from other countries
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current account
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In the balance of payments, this records transactions involving the export or import of goods and services
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balance on goods and services
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The portion of a country's balance-of-payments account that measures the value of a country's exports of goods and services minus the value of its imports of goods and services.
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trade deficit
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Occurs when a country's exports of goods and services are less than its imports of goods and services in a given period.
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trade surplus
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The amount by which a nation's exports of goods exceeds its import of goods
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balance on current account
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The exports of a goods and services of a nation minus its imports of goods and services plus its net investment income and net transfers in a year
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capital and financial account
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Consists of two separate accounts, on the bottom portion of the balance sheet
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balance on capital and financial account
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In the United States, the sum of the following (measured in a given period): the change in private U.S. assets abroad, the change in foreign private assets in the United States, the change in U.S. government assets abroad, and the change in foreign government assets in the United States.
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official reserves
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foreign currencies owned by the central bank of a nation
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balance of payments deficits and surpluses
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Shortfall that occurs when more money flows out of a nation than into that nation.
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flexible or floating exchange rate system
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since 1971, a system based purely on supply and demand for a currency in the foreign exchange market. Initiated by European countries that lost faith in the dollar
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fired exchange rate system
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The system whereby currency exchange rates are fixed, or pegged, by countries' governments.
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purchasing power parity theory
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the idea that exchange rates between nations equate the purchasing power of various currencies. Exchange rates between any two nations adjust to reflect the price level differences between the countries
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currency intervention
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Gov't or central bank steps into currency market and makes moves to achieve certain outcome; e.g. Japan's Central Bank after tsunami had options to bring currency back down from repatriation effect (buy bonds, print Yen, buy dollars)
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exchange controls
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controls that a gov may exercise over the quantity of foreign currency demanded by its citizens and firms and over the rates of exchange as a way to limit the nation's quantity of outpayments relative to inpayments
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managed floating exchange rates
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an exchange rate that is allowed to change as a result of changes in currency supply and demand but at times is altered by governments via buying and selling of particular currencies
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