BEEB2023 Macro Chp 7 2014 (ENGLISH VERSION) - CHAPTER 7 THE...

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CHAPTER 7THE BALANCE OF PAYMENT & EXCHANGE RATES
IntroductionThe economies of the world have become increasingly interdependent.Economic events in one country can have repercussion on the economies of other countries.
International trade is a major part of today’s world economy. Why?
What is ER?
The World Monetary SystemThe world monetary system has been changed several times by international aggrements and events.Early in the century, nearly all currencies were backed by gold which determined their values in international trading.
Balance of PaymentBoP – the record of a nation’s transactions with the rest of the world.-Goods-Services-AssetsBoP is divided up into two major accounts:-Current account-Capital account
Current AccountItems in the current account:-Trade account-Services account-Transfer payments account
Capital AccountItems in the capital account:-Long-term capital account-Short-term capital account-Capital of adjustment account-Net change in international reserve-Special drawing right (SDR) allocation-International Monetary Fund sources
Example of BoPPls. refer to the attachments.

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