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The Monetary System in the International Arena - Coggle Diagram
The Monetary System in
the International Arena
international transactions
events abroad have repercussions at home.
buying goods / services/ assets from other countries
complicated due to monetary systems
The foreign exchange market is where these transactions take place.
global trading is quickly made
trade in stocks
bonds
bank deposits
countries influence other countries
Balance of payments
a summary statement of all transactions that take place between a country and the rest of the world during a given period of time
main uses:
provide info about supply of foreign exchange
provide info about demand of foreign exchange
The balance of payments uses a double-entry system of bookkeeping.
Transactions are recorded as debits and credits.
balance of payments summarizes a country's transactions that require payments to other countries and transactions that require payments from other countries
debits:
Imports of goods and services
Transfers to foreign residents (also known as remittances)
(also known as remittances)
Acquisition of long-term assets or reduction of a long-term liability
stocks, bonds, real capital
Acquisition of a short-term asset or reduction of a short-term liability
bank deposits, cash or short-term bonds such as treasury bills
Balance of payments (2)
credits
nnn
Exports of goods and services
Transfers from foreign residents
Sale of a long-term asset or increase of a long-term liability
n
transaction is a
flow for which the home country is paid and increases the demand for the
home currency by foreign residents.
Sale of a short-term asset or increase of a short-term liability.
Current and Capital Accounts
All transactions are placed into specific categories.
The current account records all transactions involving goods and services.
The simplest breakdown is between the current account and the capital account.
One of the most important categories of the balance of payments is the current account.
The purchase of home country assets by foreign residents
inward investment
capital inflow
Transactions in physical assets
direct investment while borrowing
lending
transactions
transactions termed indirect or portfolio investment.