Current Account
Financial Account
Appreciation/Deprecitation/Interest Rates
Specialization and Trade
FOREX
100
What is trade deficit?
When imports exceed exports
100
When inflow is greater than outlfow
What is Financial Account surplus
100
What is appreciation
An increase in the value of a currency
100
When a country is the most efficient producer of a product
What is comparative advantage
100
What are the labels to the foreign exchange graph
What is quantity of money on the x-axis and exchange rate on the y axis
200
U.S. earnings on investment abroad minus foreign earnings from capital invested in the United States.
Net Investment Income
200
When a foreign company buys business in a different country
What is Foreign Direct Investment
200
What is depreciation
A decrease in the value of a currency
200
Poland can make 8 pants or 16 socks. Iceland can make 20 pants or 30 socks. Who has a comparative advantage in producing socks?
Poland has the comparative adv in socks.
Poland 1P=2S / 1S=1/2P
Iceland 1P=1 1/3S / 1S = 2/3P
200
Relative price of currencies
What is Exchange Rate
300
Foreign aid sent to other countries and funds that immigrants send to family abroad.
Net Transfers
300
When the US purchases more Foreign assets than foreign countries purchase of assets from the US
What is Net Capital Outflow (Debit)
300
What is the effect on net exports if currency appreciates?
Net exports decline
300
Tax on a product not produced domestically
What is a tariff?
300
What are the shifters of FOREX?
(name 3 out of the 5)
What is Change in tastes, changes in relative incomes, changes in relative price levels, changes in relative interest rates, and regulation
400
What is a debit
A loss in the current/financial account
400
True or false: If a country has a deficit in the current account then they MUST have a deficit in financial account
False
400
How will low real interest rates affect the demand for a country's currency?
Demand will decrease
400
A limit on the quantity of imports allowed into a country
Quota
400
What would happen to the U.S dollar if Europeans prefer vacationing in the U.S? What would happen to the Euro?
U.S dollar appreciates and demand increases
The Euro depreciates and supply increases
500
Gloria sends $500 to her family in Colombia. How does this affect the US Current Account?
Current Account decreases by $500
500
The financial flows recorded in the financial account are also part of this market
Loanable Funds Market
500
What will happen to the value of a currency if real interest rates rise?
The value of the currency will increase (The currency appreciates)
500
Country X produces a phone in 20 minutes and a radio in 5 minutes
Country Y produces a phone in 30 minutes and a radio in 15 minutes
Which country has the comparative advantage in producing phones?
Country Y - comparative advantage in phones
Country X 1P=4R / 1R=1/4 P
Country Y 1P=2R / 1R=1/2P
500
Draw the FOREX market if Europeans prefer vacationing in the United States.
