Principles of Economics, Ninth Edition by Karl E. Case, Ray C. Fair, and Sharon M. Oster: Chapter 35: "Open-Economy Macroeconomics: The Balance of Payments and Exchange Rates"
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| 66753005 | exchange rate | The price of one country's currency in terms of another country's currency; the ratio at which two currencies are traded for each other. | 0 | |
| 66753006 | foreign exchange | All currencies other than the domestic currency of a given country. | 1 | |
| 66753007 | balance of payments | The record of a country's transactions in goods, services, and assets with the rest of the world; also the record of a country's sources (supply) and uses (demand) of foreign exchange. | 2 | |
| 66753008 | balance of trade | A country's exports of goods and services minus its imports of goods and services. | 3 | |
| 66753009 | trade deficit | Occurs when a country's exports of goods and services are less than its imports of goods and services. | 4 | |
| 66753010 | balance on current account | Net exports of goods plus net exports of services plus net investment income plus net transfer payments. | 5 | |
| 66753011 | balance on capital account | In the U.S., the sum of the following (measured in a given period): the change in private assets abroad, the change in foreign private assets in the U.S., the change in U.S. government assets abroad, and the change in foreign government assets in the U.S. | 6 | |
| 66753012 | creditor nation | A country that has a positive net worth position vis-à-vis the rest of the world. | 7 | |
| 66753013 | debtor nation | A country that has a negative net wealth position vis-à-vis the rest of the world. | 8 | |
| 66753014 | Planned aggregate expenditure in an open economy | AE≡C+I+G+EX-IM | 9 | |
| 66753015 | net exports of goods and services (EX-IM) | The difference between a country's total exports and total imports. | 10 | |
| 66753016 | marginal propensity to import (MPM) | The change in imports caused by a $1 change in income. | 11 | |
| 66753017 | open-economy multiplier | 1/(1-(MPC-MPM) | 12 | |
| 66753018 | trade feedback effect | The tendency for an increase in the economic activity of one country to lead to a worldwide increase in economic activity, which then feeds back to that country. | 13 | |
| 66753019 | price feedback effect | The process by which a domestic price increase in one country can "feed back" on itself through export and import prices. An increase in the price level in one country can drive up prices in other countries. This in turn further increases the price level in the first country. | 14 | |
| 66753020 | floating, or market-determined, exchange rates | Exchange rates that are determined by the unregulated forces of supply and demand. | 15 | |
| 66753021 | appreciation of a currency | The rise in value of one currency relative to another. | 16 | |
| 66753022 | depreciation of a currency | The fall in value of one currency relative to another. | 17 | |
| 66753023 | law of one price | If the costs of transportation are small, the price of the same good should be roughly the same. | 18 | |
| 66753024 | purchasing-power-parity theory | A theory of international exchange holding that exchange rates are set so that the price of similar goods in different countries is the same. | 19 | |
| 66753025 | J-curve effect | Following a currency depreciation, a country's balance of trade may get worse before it gets better. The graph showing this effect is shaped like the letter J, hence the name J-curve effect. | 20 | |
| 66753026 | balance of trade | dollar price of exports X quantity of exports - dollar price of imports X quantity of imports | 21 | |
| 66753027 | A currency depreciation affects the items on the right side of the balance of trade equation because: | (1) the quantity of exports increases and the quantity of imports decreases; both have a positive effect on the balance of trade (lowering the trade deficit or raising the trade surplus). (2) the dollar price of exports changes when the U.S. price level changes, but the initial effect of a depreciation on the domestic price level is not likely to be large. (3) the dollar price of imports increases. An increase in the dollar price of imports has a negative effect on the balance of trade. | 22 |
