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foreign exchange market

what currencies are traded in

exchange rate

price at which currencies trade are known as

appreciates

when currency becomes more valuable in terms of other currencies

depreciates

when a currency becomes less valueable in terms of other currencies

equilibrium exchange rate

the exchange rate at which the quantity of a currency demanded in the foreign exchange market is equal to the quatity supplied

Real exchange rate

exchange rates adjusted for international differences in aggregate price levels

purchasing power parity

between two countries' currencies is the nominal exchange rate at which a given basket of goods and services would cost the same amont in each country

balance of payments

summary of the country's transactions with other countries

current account

a country's balance of payments on goods and services plus net international transfer payment and factor income

balance of payments on goods and services

the difference between its exports and its imports during a given point

trade balance

the difference between a country's exports and imports of goods; does not included services

financial account

transactions that involve the sale or purchase of assets and theredore do create liabilities

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