AP Macroeconomics Unit 7

trade deficit

An imbalance in international trade in which the value of imports exceeds the value of exports. (U.S.)

trade surplus

when a country exports more than it imports

current account

A category of balance of payments transactions that measures the exchange of merchandise, the exchange of services, and unilateral transfers.

financial account

Measures the flow of funds for investment in real assets, such as factories or office buildings, or financial assets, such as stocks, between a nation and the rest of the world

foreign exchange market

A market for converting the currency of one country into that of another country.

exchange rate determination

Exchange rate of each currency in terms of another determined by market demand and supply conditions for each currency.

appreciation

An increase in the value of a currency as measured by the amount of a foreign currency it can buy, resulting from in increase in demand for that currency

depreciation

A decrease in exchange rate in a floating exchange rate system due to in increase in supply of the currency in the foreign exchange market

Foreign Exchange Graph

graphic depiction of a country's currency compared to another country's currency; x-axis is quantity of the country's money (Demanded or supplied), y-axis is the value of the foreign currency compared to the country's currency