MGEA06H3 Chapter Notes - Chapter 19: Foreign Exchange Market, Policy Exchange, Devaluation
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MGEA06H3 Full Course Notes
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Balance of payments accounts summary of the country"s transactions with other countries. Balance of payments on current account balance of payments on goods/services plus net international transfer payments and factor income. Balance of payments on goods and services difference between exports and imports. Merchandise trade balance difference between country"s exports and import of goods. Balance of payments on financial account difference between its sales of assets to foreigners. It"s a basic rule of balance of payments accounting that the current account and the financial account must sum to zero (missing pg618 notes) Currencies are traded in the foreign exchange market. Prices at which currencies trade are known as exchange rates. When a currency becomes more valuable in terms of others, it appreciates, other way for depreciates. Equilibrium exchange rate the quantity of a currency demanded in foreign exchange market is equal to quantity supplied. Real exchange rates adjusted for international differences in aggregate price levels.