CHAPTER 17 1.0 / 5 based on 1 rating ? EconomicsA2/A-levelAQA Created by: hayley ashtonCreated on: 26-02-13 22:52 Current Account? The part of the balance of payments that primarily records trade in goods and services 1 of 20 Capital Account and Financial Account? The part of the balance of payments that records capital flows in and out of the country 2 of 20 Current Account Deficit? When imports of goods and services exceed exports 3 of 20 Current Account Surplus? When exports of goods and services exceed imports 4 of 20 Balance of Trade in Goods? Visible exports minus visible imports 5 of 20 Balance of Trade in Services? Invisible exports minus invisible imports 6 of 20 Net Income Flows? Difference between inward and outward flows or interest, profits and dividends 7 of 20 Net Current Transfers? Mainly government transfers to and from overseas organisations 8 of 20 Hot Money? Volatile capital movements which take place in the foreign exchange markets due to the interest rate changes 9 of 20 Direct Investment? The acquisition of productive assets. Eg, factories and offices 10 of 20 Portfolio Investment? The acquisition of financial assets. Eg, shares and financial derivatives 11 of 20 Expenditure-reducing Policies? Policies used to correct current account imbalances by reducing consumer spending power 12 of 20 Expenditure-switching Policies? Policies used to correct current account imbalances by encouraging consumers to buy domestically produced output rather than imports 13 of 20 Marginal Propensity to Import? Proportion of an increase in income that is spent on imports 14 of 20 Direct Controls? Controls on imports, such as tariffs and quotas 15 of 20 Devaluation? Reducing the value of a currency in a fixed or semi-fixed exchange rate system 16 of 20 Depreciation? In relation to currencies, reducing the value of a currency in a free-floating exchange rate system 17 of 20 J-curve Effect? In the short term, a devaluation or depreciation will lead to a deterioration of the current account before it starts to improve 18 of 20 Revaluation? Increasing the value of a currency in a fixed or semi-fixed exchange rate system 19 of 20 Appreciation? Increasing the value of a currency in a free-floating exchange rate system 20 of 20
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