ECON 2101 - Ch. 38
International Finance
(questions and
answers)
three key principles of international finance - answer 1. gains from trade
occurs when people trade across different countries with different currencies
just as gains from trade occur within a single nation with single currency
2. the rate of savings is a key variable in understanding international trade
and finance
3. market equilibrium means that at the margin, the gains form holding or
spending one currency are equal to gains form holding or spending some
other currency
define trade deficit - answer the annual difference that results when the
value of a country's imports exceed the value of its exports
- isn't a problem when trade is balanced
define trade surplus - answer the annual difference that results when the
value of a country's exports exceed the value of its imports
1. For every flow of _______, there is a corresponding and _______ flow of
_______ or _______ claims
2. When there is no ________ or _________, a person's trade deficits must be
matched with other trade _______
, 3. In the long run, trade deficit must ______ and turn into _________
4. Earnings ___ spendings means a trade ________. This can be corrected by
5. Earnings ___ spendings means a trade ________. This can be corrected by -
answer 1. goods; opposite; money; financial
2. borrowing; lending; surpluses
3. disappear; trade surplus (unless your loan declines)
4. <; deficit; correct by increasing debt, assets, cash reserves
5. >; surplus; correct by decreasing debt, assets, cash reserves
define balance of payments - answer a yearly summary of all the economic
transactions between residents of one country and residents of the rest of
the world
define capital surplus - answer (capital inflow) the excess that exists when
the inflow of foreign capital into a country is greater than the outflow of
domestic capital
define international balance of payments - answer current account = (-)
capital account + change in official reserves
define current account - answer in the balance of payments, the sum of the
balance of trade, net income on capital held abroad and the net transfer of
payments
International Finance
(questions and
answers)
three key principles of international finance - answer 1. gains from trade
occurs when people trade across different countries with different currencies
just as gains from trade occur within a single nation with single currency
2. the rate of savings is a key variable in understanding international trade
and finance
3. market equilibrium means that at the margin, the gains form holding or
spending one currency are equal to gains form holding or spending some
other currency
define trade deficit - answer the annual difference that results when the
value of a country's imports exceed the value of its exports
- isn't a problem when trade is balanced
define trade surplus - answer the annual difference that results when the
value of a country's exports exceed the value of its imports
1. For every flow of _______, there is a corresponding and _______ flow of
_______ or _______ claims
2. When there is no ________ or _________, a person's trade deficits must be
matched with other trade _______
, 3. In the long run, trade deficit must ______ and turn into _________
4. Earnings ___ spendings means a trade ________. This can be corrected by
5. Earnings ___ spendings means a trade ________. This can be corrected by -
answer 1. goods; opposite; money; financial
2. borrowing; lending; surpluses
3. disappear; trade surplus (unless your loan declines)
4. <; deficit; correct by increasing debt, assets, cash reserves
5. >; surplus; correct by decreasing debt, assets, cash reserves
define balance of payments - answer a yearly summary of all the economic
transactions between residents of one country and residents of the rest of
the world
define capital surplus - answer (capital inflow) the excess that exists when
the inflow of foreign capital into a country is greater than the outflow of
domestic capital
define international balance of payments - answer current account = (-)
capital account + change in official reserves
define current account - answer in the balance of payments, the sum of the
balance of trade, net income on capital held abroad and the net transfer of
payments
