Diplomacy & Politics Glossary

A record of all economic transactions between residents of a country and the rest of the world over a period.

The capital account records cross-border transfers of ownership of assets, including investments, loans, and banking flows.

The net flow of capital transactions, including investments and loans, into and out of a country within the balance of payments framework.

The process of removing restrictions on capital flows into and out of a country to encourage investment and financial integration.

Government measures to regulate cross-border capital movements to stabilize the economy.

The degree of fluctuation in cross-border financial investments and loans over a short period, affecting economic stability.

Additional capital banks must hold during economic expansions to protect the financial system during downturns.

Government spending and taxation policies designed to counteract economic fluctuations and stabilize growth.

Monetary actions aimed at stabilizing the economy by increasing money supply during recessions and decreasing it during booms.

An analytical tool used by international organizations to assess a country's ability to manage its external debt without defaulting.

Economic harm caused when resource exports lead to currency appreciation, reducing competitiveness of other sectors.

A weighted average exchange rate of a country's currency against a basket of other currencies, reflecting trade importance.

The weighted average exchange rate of a country's currency against a basket of other currencies, reflecting trade patterns and currency values.

The price of one country's currency expressed in terms of another's, affecting trade and investment flows.

A weighted average of several currencies used by a country to stabilize its own currency's value.

The extent to which changes in exchange rates affect domestic prices of imported and exported goods.

A fixed exchange rate system where a country’s currency value is tied to another currency or basket of currencies.

The system a country uses to manage its currency in relation to other currencies, such as fixed, floating, or pegged.

The degree of fluctuation in a currency's value against others over time.

An economic strategy that emphasizes expanding exports to drive national economic development and increase GDP.

The ratio of a change in national income to the change in government spending that caused it, indicating fiscal policy effectiveness.

The process where governments align their fiscal policies to achieve common economic objectives and avoid negative spillovers.

The ratio measuring the change in economic output resulting from a change in government spending or taxation.

The capacity of a government to provide additional budgetary resources without compromising fiscal sustainability.

An economic theory emphasizing the control of money supply as the primary method to regulate economic activity and inflation.

The total market value of all final goods and services produced within a country in a given period.

The percentage increase in the general price level of goods and services over a period, reducing purchasing power.

Economic policies that use government spending and taxation to influence aggregate demand and stabilize the economy.

An economic theory emphasizing total spending in the economy and its effects on output and inflation, advocating government intervention during recessions.

Government policy of increasing public spending or cutting taxes to boost aggregate demand and combat economic recessions.

A situation where monetary policy becomes ineffective because interest rates are near zero and savings rates remain high, limiting economic stimulus through traditional channels.

An economic concept where an initial increase in spending leads to a greater overall increase in national income, amplifying the effects of fiscal policy.

Milton Friedman's economic theory emphasizing the control of money supply to manage inflation and economic stability.

The concept that changes in the money supply only affect nominal variables like prices, not real variables like output or employment, in the long run.

Central bank actions controlling money supply and interest rates to manage inflation and economic growth.

Central bank actions to offset the impact of foreign exchange interventions on the domestic money supply.

The process through which changes in monetary policy influence economic variables like inflation and output.

The process through which changes in monetary policy affect the economy, including interest rates, investment, and inflation.

Central bank actions to offset foreign exchange interventions to maintain monetary policy targets.

A group of countries that adopt a single currency and coordinate monetary policy.

Keynes's theory that an initial government spending increase leads to a larger overall economic output boost.

An index measuring a currency’s value relative to a weighted average of several foreign currencies without adjusting for price differences.

The ratio of export prices to import prices, indicating how many imports a country can buy per unit of exports.

Measures the ratio of export prices to import prices, indicating the purchasing power of a country's exports.

The difference between the monetary value of a country's exports and imports over a period.

Trade liberalization effects describe changes in economic growth, employment, and income distribution following tariff reductions.