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  • Since all entries in the balance of payments should collectively sum to zero, the balance of- payments accountant can determine the errors that were made. This is called the statistical discrepancy. #171
  • With constant exchange rates, the correctly measured deficit/surplus in the current account equals the correctly measured surplus/deficit in the capital account. #172
  • A country records its international finance accounts in its #173
  • It is equally valid to consider a current-account deficit/surplus to be the cause of, or to be caused by, a capital-account surplus/deficit. #174
  • Flexible exchange rates are determined by the forces of … supply and demand. #175
  • We can construct the supply curve of a currency from a country’s demand curve for …, and the demand curve for a currency from the country’s supply curve of exports. #176
  • The effect of any item in the … account on the exchange rate can be determined by identifying how it shifts the currency supply or currency demand curve. #177
  • …, an improvement in a country’s terms of trade causes the country’s currency to appreciate. #178
  • … that is higher than in other countries causes a country’s currency to depreciate. If inflation in different countries is equal, ceteris paribus, exchange rates do not change. #179
  • If import demand is … the currency supply curve slopes downward. #180
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