International Trade

Vocabulary

appreciation of currency

an increase in a currency's value determined by the amount of foreign currency it buys

balance of payments

an account of all exchanges of goods and services, including payments and receipts, from one country to all other countries with which it is involved with trade

balanced trade

situation in which the money made on imports equals the money spent on exports

Bretton Woods Agreement

agreement put in place after WWII to peg, or tie, international exchange rates to the US Dollar

capital account

the net value of a country's purchases of foreign financial and capital assets and foreign purchases of that country's financial and capital assets

current account

net value of exports and imports in a given country

current transfer

transfer of wealth from one nation to another, usually in the form of aid

depreciation of currency

decrease in a currency's value

foreign direct investment (FDI)

investment from one country in long-term projects in other countries

foreign exchange rate

rate of exchange when one currency is exchanged for another

forward trade

agreement to exchange currencies in the future at a set rate

gold reserves

stores of gold held by a country to back currency in a gold standard

gold standard

system in which money is backed by gold held in reserve

interbank market

foreign exchange market among major banks

net exporter

nation that exports more than it imports

net importer

nation that imports more than it exports

over the counter (OTC)

foreign exchange market involving companies and individuals

spot trade

an immediate exchange in currency conducted at the exchange rate at the time of the trade

swap trade

a trade in which currency is bought as a spot trade, then sold as a forward trade

trade deficit

situation in which more money is spent on imports than is made on exports

trade surplus

situation in which more money is made through exports than is spent on imports