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Fiscal and Monetary Policy - Lesson Summary

Hofstede’s Cultural Dimensions represent independent preferences for one state of affairs over another that distinguish countries from each other.
Professor Geert Hofstede defined cultures as the collective programming of the mind to distinguish the members of one group or category of people from others.
The Power Distance Index Dimension expresses the degree to which the less powerful members of a society accept and expect that power is distributed unequally.
In a collectivist society, people are supposed to be loyal to the group to which they belong and in exchange, the group will defend their interests.
Uncertainty avoidance is the extent to which the members belonging to a society are capable of coping with future uncertainty without going through stress.
The uncertainty avoidance dimension expresses the degree to which members of a society feel uncomfortable with uncertainty and ambiguity.
Indulgence stands for a society that allows relatively free gratification of basic and natural human drives that are related to fun and the enjoyment of life.
The Balance of Payment is a statement which records all the monitory transactions made between residents of a country and the rest of the world within a particular period of time.
The current account on the balance of payments measure the inflow and outflow of goods, services, investment incomes and unilateral transfer payments.
The Balance of Trade is the difference between the monitory value of a nation’s exports and imports over a certain time period.
An economic system is a set of structures and processes that guide the allocation of resources and it also shapes the operation of business activities in a country.
An open economy encourages the open exchange of goods and services between producers and consumers, in which individuals, rather than the government make the majority of economic decisions.
The basic function of the foreign exchange market is to facilitate the conversion of one currency into another.
The transfer function of the foreign exchange market is performed through the use of credit instruments such as bank drafts, bill of exchange and telephone transfers.
A higher rate of inflation will make a country’s currency less attractive because of the loss of real value and countries with consistently high inflation rates tend to have lower currency values.