1.3.3 International Economic Factors

The balance of payments is the record of one country's transactions with the rest of the world: what flows in, and what flows out. A country that sells more abroad than it buys is running a surplus on that record. One that buys more than it sells is running a deficit. That is the whole of it, and a stem here is usually asking you to read a direction, not to compute anything.

GDP and GNP sit one letter apart for a reason. GDP measures output produced inside a country's own borders, by anyone at all. GNP measures output produced by that country's own citizens and companies, wherever in the world they happen to be. Location, or ownership. A Japanese car plant in Ohio counts toward American GDP because of where it sits, and toward Japanese GNP because of who owns it.

An exchange rate is the price of one currency in terms of another, and it moves the value of everything crossing a border. A stronger home currency buys more abroad, so imports get cheaper, and it makes home-made goods cost more to a foreign buyer, so exports get dearer. A weaker home currency does the reverse: imports dearer, exports cheaper abroad. Nothing else changes, and no rule governs any of it.

None of these three carries a FINRA rule number, which tells you what kind of question to expect. These are naming questions. Read the stem for the direction it describes, name the term that matches, and move on.