Copyright 2008 The McGraw-Hill Companies 19-1 Financing In ternational Trade Capital and Financial Ac count Flexible Exc hange Rates Fixed Exchan ge Rates Internationa l Exchange-R ates System Recent U.S. Trade Defici ts Last Word Key Terms End Show 19 Exchange Rates, the Balance of Payments, and Trade Deficits
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Copyright 2008 The McGraw-Hill Companies 19-1 Financing International Trade Capital and Financial Account Flexible Exchange Rates Fixed Exchange Rates.
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Copyright 2008 The McGraw-Hill Companies19-1
Financing International Trade
Capital and Financial Account
Flexible Exchange Rates
Fixed Exchange Rates
International Exchange-Rates System
Recent U.S. Trade Deficits
Last Word
Key Terms
End Show
19Exchange Rates, the Balance of Payments, and Trade Deficits
Copyright 2008 The McGraw-Hill Companies19-2
Financing International Trade
Capital and Financial Account
Flexible Exchange Rates
Fixed Exchange Rates
International Exchange-Rates System
Recent U.S. Trade Deficits
Last Word
Key Terms
End Show
Chapter Objectives• How Currencies of Different Nations
are Exchanged When International Transactions Take Place
• About the Balance Sheet the United States Uses to Account for the International Payments it Makes and Receives
• How Exchange Rates are Determined in Currency Markets
• The Difference Between Flexible Exchange Rates and Fixed Exchange Rates
• The Causes and Consequences of Recent Record-High U.S. Trade Deficits
Copyright 2008 The McGraw-Hill Companies19-3
Financing International Trade
Capital and Financial Account
Flexible Exchange Rates
Fixed Exchange Rates
International Exchange-Rates System
Recent U.S. Trade Deficits
Last Word
Key Terms
End Show
Financing International Trade• U.S. Export Transactions• U.S. Import Transactions• Balance of Payments• The Current Account
–Balance on Goods–Balance on Services–Trade Deficit–Trade Surplus–Balance on Current
Account
W19.1
Copyright 2008 The McGraw-Hill Companies19-4
Financing International Trade
Capital and Financial Account
Flexible Exchange Rates
Fixed Exchange Rates
International Exchange-Rates System
Recent U.S. Trade Deficits
Last Word
Key Terms
End Show
Financing International Trade
U.S. Trade Balances in Goods and ServicesSelect Nations, 2004
Goods and Services SurplusGood and Services Deficit
Australia
Belgium
Canada
China
Germany
Mexico
Netherlands
+6.8
-66.5
-45.8
+4.4
-162
-45.1
+11.8
Source: BEA
GLOBAL PERSPECTIVE
-10-20-30-40-50-60-70-160 10 20
Japan -75.6
Copyright 2008 The McGraw-Hill Companies19-5
Financing International Trade
Capital and Financial Account
Flexible Exchange Rates
Fixed Exchange Rates
International Exchange-Rates System
Recent U.S. Trade Deficits
Last Word
Key Terms
End Show
Capital and Financial Account
• Capital Account• Financial Account• Balance on the Capital and
Financial Account–Payments, Deficits, and
Surpluses–Balance-of-Payments
Deficits and Surpluses–Official Reserves
Copyright 2008 The McGraw-Hill Companies19-6
Financing International Trade
Capital and Financial Account
Flexible Exchange Rates
Fixed Exchange Rates
International Exchange-Rates System
Recent U.S. Trade Deficits
Last Word
Key Terms
End Show
Flexible Exchange Rates• Flexible or Floating Exchange
Rates• Fixed Exchange Rate system• Depreciation and Appreciation• Determinants of Exchange
Rates– Changes in Tastes– Relative Income Changes– Relative Price-Level Changes