Flashcards in Chapter 28 Deck (15):
Refers to countries adopting the U.S. dollar as their currency.
foreign exchange market
Market in which people or firms use one currency to purchase another currency.
foreign direct investment
Form of financial investment that crosses international boundaries, and thus requires an exchange of currency. Refers to purchases of firms in another country that involve the taking of a management responsibility.
Form of financial investment that crosses international boundaries, and thus requires an exchange of currency. Refers to a purely financial investment that does not involve any management responsibility.
Occurs when the exchange rate for a currency rises so that the currency trades for more of other currencies.
Occurs when the exchange rate for a currency is falling so that the currency trades for less of other currencies.
real exchange rates
Exchange rates adjusted for international differences in aggregate price levels.
Act of buying low in one market and selling high in another market.
purchasing power parity
Exchange rate that equalizes the prices of internationally traded goods across countries.
balance of payments
Broad concept used to monitor all international monetary transactions during a given time period.
balance of trade
Refers to the balance between imports and exports of goods and services during the same time period.
Transaction related to the balance of payments. Export and import of goods and services as well as any international earnings on investments, both public and private.
Transaction related to the balance of payments. Recording of all international purchases and sales of stocks, bonds, real estate, businesses, and bank accounts.
official reserve account
Transaction related to the balance of payments. Records all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights (SDRs) by a nation’s central bank.