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BUS 313 Midterm
Terms in this set (3)
Official (international) reserve assets:
(Balance of Payments Accounts )
- foreign assets held by central banks to cushion against financial instability.
-Assets include government bonds, currency, gold, and accounts at the International Monetary Fund.
-Official reserve assets owned by (sold to) foreign central banks are a credit (+) because the domestic central bank can spend more money to cushion against instability.
-Official reserve assets owned by (purchased by) the domestic central bank are a debit (-) because the domestic central bank can spend less money to cushion against instability.
negative value of the official reserve assets
official settlements balance or "balance of payments."
-It is the sum of the current account, the capital account, the nonreserve portion of the financial account, and the statistical discrepancy.
-A negative official settlements balance may indicate that a country
is depleting its official international reserve assets, or
may be incurring large debts to foreign central banks so that the domestic central bank can spend a lot to protect against financial instability.
U.S. Balance of Payments Accounts
The U.S. has the most negative net foreign wealth in the world, and so is therefore the world's largest debtor nation.
-its foreign debt continues to grow because its current account continues to be negative.
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