When a currency increases in value (more units of foreign currency are needed to buy it)
Balance of payments accounts
Where nations track capital inflows and outflows of money. Current account and financial account must balance
Current account balance
Records a nation's trade in goods, services and other immediately-useful items with other countries.
Depreciate (currency)
When a currency decreases in value (less units of foreign currency are needed to buy it)
Devaluation
When a currency loses its value in relation to other currencies.
Equilibrium exchange rate
The meeting point of currency supply and demand in the foreign exchange market
Exchange market intervention
Monetary policy tool used to build reserves of foreign currencies or to manipulate the exchange rates of currencies
Exchange rate regime
How a country manages its currency relative to other currencies around the world
Exchange rates
Rates at which units of one currency may be exchanged (given up) for a unit of another currency
Financial account balance
The sum of inflows and outflows of money paying for financial assets.
Floating exchange rate
When the rate at which one nation's currency may be bought with other currencies is allowed to increase or decrease due to the forces of supply and demand, without government intervention.
Foreign exchange controls
Limits on the buying and selling of currencies in the foreign exchange markets, to prevent rapid shifts in value
Foreign exchange market
Where units of one currency are bought and sold in exchange for units of other currencies.
Foreign exchange reserves
Money denominated in another country's currency, held by a government in order to control or influence values in the foreign exchange market or to buy foreign-denominated assets
Goods and services balance
Positive if more goods and services by value are exported by a country; negative when more are coming in
Import quota
A limit on the amount of a good that can be brought into a country
Merchandise trade balance
Difference in value between imported and exported goods; negative when a nation's imports > exports
Protectionism
Any government policy designed to put domestic producers at an advantage and foreign producers at a disadvantage
Purchasing power parity
The theory that two countries have parity when a basket of goods would cost the same in both countries, taking into account exchange rates and domestic prices.
Real exchange rate
An index that compares the relative price of two countries' baskets of goods
Revaluation
An adjustment of a nation's currency in relation to other currencies.
Tariffs
Taxes on imports of goods and services into a country that are produced elsewhere