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AP Macroeconomics Unit 5 Flashcards

13484384198	Net Exports	(Xn) = Exports - Imports	0
13484384199	Trade Surplus	Exporting more than is imported	1
13484384200	Trade Deficit	AKA Trade Gap Exporting less than is imported	2
13484384201	Balance of Payments	Summary of a country's international trade -Within a given year -In own currency	3
13484384202	Foreign Direct Investment	When a foreign company buys a business in a different country	4
13484384203	Net Capital Outflow	The difference between purchase of foreign assets and domestic assets by foreigners	5
13484384204	What two accounts is the balance of payments made up of?	Current account Financial account	6
13484384205	What is the current account made up of?	1. Trade in goods and services (Net Exports): Difference between a nation's exports and imports 2. Investment Income: Income earned from investments abroad minus foreign earnings from investments in the US (interest) 3. Net Transfers: Funds sent by residents of one country to another country	7
13484384206	Current Account (CA) Trade in Goods and Services	Exports of goods and services + (plus/credit) Imports of goods and services - (minus/debit)	8
13484384207	Financial Account (Capital)	Measures the purchase and sale of financial assets abroad (purchases of things that continue to earn money)	9
13484384208	Financial Account (FA) Summarizes Trade in Assets	US assets owned by foreigners + (plus/credit) Foreign assets owned by US - (minus/debit)	10
13484384209	Financial Account Surplus	Inflow > outflow	11
13484384210	Financial Account Deficit	Inflow < outflow	12
13484384211	What must a country have if the have a deficit in the current account?	A surplus in the financial account	13
13484384212	US income increases relative to other countries. Does the balance of payments move toward a deficit or surplus?	1. U.S. Citizens have more disposable income 2. Americans import more 3. Net exports decrease 4. The current account balance decreases and moves toward a deficit	14
13484384213	If the US dollar depreciates relative to other countries does the balance of payments move toward a deficit or a surplus?	1. US exports become more desirable 2. America exports more 3. Net exports increases 4. The current account balance increases and moves toward a surplus	15
13484384214	What do we look at in the FOREX market?	Two countries/currencies at a time We examine the price of one currency in terms of the other currency	16
13484384215	What does the exchange rate depend on?	Which currency you're converting	17
13484384216	What happens if you need more dollars to buy one euro (the price for a euro increases)?	The U.S. Dollar depreciates relative to the Euro	18
13484384217	Depreciation	The loss of a country's currency with respect to a foreign country More units of dollars are needed to buy a single unit of the other currency The dollar is said to be "weaker"	19
13484384218	What happens if you need less dollars to buy one Euro (the price for a Euro decreases)?	The US Dollar appreciates relative to the Euro	20
13484384219	Appreciation	The increase in value of a country's currency with respect to a foreign currency Less units of dollars are needed to buy a single unit of the other currency The dollar is said to be "stronger"	21
13484384220	What happens if you demand one currency?	You must supply your currency	22
13484384221	Dollar Market Graph	The bottom currency on the vertical axis is also the bottom of the horizontal axis	23
13484384222	FOREX Shifters	1. Changes in Tastes 2. Changes in Relative Incomes 3. Changes in Relative Price Level 4. Changes in Relative Interest Rate	24
13484384223	Changes in Tastes (FOREX Shifter)	Ex. British tourists flock to the US Demand for US dollars increases (shifts right) Supply of British Pounds increases (shifts right) Pound: Depreciates Dollar: Appreciates	25
13484384224	Changes in Relative Incomes (FOREX Shifter)	Resulting in more imports Ex. US growth increases US incomes US buys more imports US demand for Pounds increases Supply of US Dollars increases Pound: Appreciates Dollar: Depreciates	26
13484384225	Changes in Relative Price Level (FOREX Shifter)	Resulting in more imports Ex. US prices increase relative to Britain US demand for cheaper imports increases US demand for pounds increases Supply of US Dollars increases Pound: Appreciates Dollar: Depreciates	27
13484384226	Changes in Relative Interest Rate	Ex. US ha a higher interest rate than Britain British people want to put money in US banks Capital flow increases towards the US British demand for US Dollars increases British supply more Pounds Pound: Depreciates Dollar: Appreciates	28
13484384228	Fixed Exchange Rate	The government activity manages the country's currency	29
13484384229	Floating Exchange Rate	The market determines the value of the country's currency	30