(BQ) Part 2 book "International economics" has contents: Balance of payments, foreign exchange markets and exchange rates, the price adjustment mechanism with flexible and fixed exchange rates, the income adjustment mechanism and synthesis of automatic adjustments,.and other contents. | Salvatore V2 - 10/13/2012 The Balance of Payments, Foreign Exchange Markets, and Exchange Rates part Part Three (Chapters 13, 14, and 15) deals with balance of payments, foreign exchange markets, and exchange rate determination. A clear grasp of the material in these three chapters is crucial for understanding Part Four, which covers adjustment to balance-of-payments disequilibria, open-economy macroeconomics, and the functioning of the present international monetary system. Chapter 13 examines the meaning, function, and measurement of the balance of payments and defines the concepts of deficit and surplus in a nation’s balance of payments. Besides presenting the theory, Chapter 14 also examines the actual operation of foreign exchange markets; therefore, it is of great practical relevance for all students of international economics, particularly business majors. Chapter 15 then deals with modern exchange rate theories and exchange rate determination based on the monetary and the asset market approach to the balance of payments. 395 12:36 . Page 395 Salvatore V2 - 10/13/2012 12:36 . Page 396 Salvatore V2 - 11/15/2012 Balance of Payments chapter LEARNING GOALS: After reading this chapter, you should be able to: • Understand what the balance of payments is and what it measures • Describe the change in the . balance of payments over the years • Understand the importance of the serious deterioration of the trade balance and net international investment position of the United States in recent years Introduction In Parts One and Two, we dealt with the “real,” as opposed to the monetary, side of the economy. Money was not explicitly considered, and the discussion was in terms of relative commodity prices. We now begin our examination of the monetary aspects of international economics, or international finance. Here, money is explicitly brought into the picture, and commodity prices are expressed in terms of domestic and .
