Chapter 18

Chapter 18 - Chapter 18 Arnold Balance of payments =...

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Chapter 18 – Arnold Balance of payments = periodic statement of the money value of all transactions between  residents of one country and residents of all other countries.  - Provides info about imports/exports, domestic residents’ earnings on assets located  abroad, foreign earnings on domestic assets, gifts to and from foreign countries,  official transactions by gvts and central banks - Record debits = any transaction that supplies the country’s currency in the foreign  exchange market o Foreign exchange market = the market in which currencies of a different  countries are exchanged - Records credits = any transaction that creates a demand for the country’s currency  in the foreign exchange market  - Grouped into three categories: o The current account Includes all payments related to the purchase and sale of goods and  services Three major components: Export of goods and services (credit +) Imports of goods and services (debits -) Net unilateral transfers abroad  o Can be credit or debit current account balance = summary statistic for these three o The capital account = all payments related to the purchase and sale of assets  and to borrowing and lending activites 2 major components
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Outflow of US capital o Debit Inflow of foreign capital o Credit Capital account balance = summary of these two (outflow – inflow) o The official reserve account International monetary fun = international organization created to oversee the international monetary system. Doesn’t control the worlds money supply but holds currency reserves for member nations and
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Chapter 18 - Chapter 18 Arnold Balance of payments =...

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