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Do you know this term?
Balance of Payments
Exchange Rates
More About Exchange Rates & Exchange Rate Regimes
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100

It is a summary of the country's transactions with other countries.

 balance of payment accounts?

100
A transaction that creates a liability is entered under this part of the Balance of Payments account.
What is the Financial Account?
100
When a currency becomes less valuable in terms of other currencies it is said to have done this.
What is depreciate?
100
An unadjusted measure of exchange rates is sometimes referred to as this.
What is nominal or the nominal exchange rate?
100
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If lenders in Britain regard loans to the U.S. equally as compared to loans in Britain and U.S. borrowers regard debt to those in Britain as equally costly as compared to those in the U.S., interest rates in the U.S. will _____________ and interest rates in Britain will _____________.

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What is decrease and increase?
200

if one currency loses value against another, we say that currency __________________

depreciates

200
The general rule about the sum of the current account and financial account is this.
What is must sum to zero?
200
Suppose that 1 U.S. dollar can be exchanged for 1.5 Euros. If the next day, 1 U.S. dollar can be exchanged for 1.2 Euros. The U.S. dollar has ____________ relative to the Euro.
What is depreciated?
200
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According to this chart, we know that inflation was______________ in Mexico relative to the U.S. between 1994 and 2011

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What is greater?
200
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The subscription service for Netflix (A U.S. based company) by an individual in Europe would appear in this box depicted in the Balance of Payments Table.

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What is A?
300

What do we call the balance of payments on goods and services plus net international transfer payments and factor income.

the current account?

300

The purchase of United States government bonds by Japanese investors will be included in which account?


The financial account (capital account)

300
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If the demand curve for U.S. dollars shifts to the right, the U.S. dollar has _____________ relative to the Euro.

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What is appreciated?
300
If 1 U.S. dollar exchanges for 0.75 Euros this is how much a $20,000 Ford will sell for in Europe.
What is 15,000 Euros?
300
If 5 Mexican Pesos exchange for 1 U.S. dollar this is how much a $20,000 Ford will sell for in Mexico.
What is 100,000 Pesos?
400

If a country has a deficit in its current account, there will be a


surplus in the financial account (formerly called capital account)

400
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If European investors decide to buy more U.S. stocks, the impact that will be seen on this graph will be this.

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What is an increase in the demand for U.S. dollars?
400
If a country wants to appreciate its currency in order to maintain a fixed exchange rate, it can ________________ through the use of monetary policy.
What is increase interest rates?
400
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Giving the shift depicted in this graph, we can expect that the current account balance in the U.S. will move more toward a _________________.

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What is deficit?
500

Assume that Canada imports more goods and services than it exports. What must be true of the Canadian trade balance?


The trade balance must be negative.

500
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Due to this shift the balance on the current account will______________ and the balance on the financial account will______________

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What is decrease and increase?
500
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Given the target exchange rate depicted here. This country will ____________________ its currency and ___________________ U.S. Dollars in the foreign exchange market.

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What is buy and sell?
500
A country with a fixed exchange rate might undertake a revaluation which will ________________ the balance of payments on the current account.
What is reduce?