International Mangement Ch. 10

Front 1

The price of one cureency expressed in terms of another. it is the number of units of one currency that can be exchanged for another

Back 1

Exchange rate

Front 2

Risk that arises from changes in the price of one currency relative to another

Back 2

Currency risk

Front 3

Currency that can be readily exchanged for other currencies

Back 3

Convertible currency

Front 4

The most convertible currencies are called...

Back 4

Hard Currencies

Front 5

a currency that is used for domestic transactions and is not acceptable for international transactions

Back 5

nonconvertible

Front 6

All forms of money that are traded internationally, including foreign currencies, bank deposits, checks, and electronic transfers

Back 6

Foreign exchange

Front 7

The global marketplace for buying and selling national currencies

Back 7

Foreign exchange market (FOREX)

Front 8

HOW EXCHANGE RATES ARE DETERMINED

1)Economic growth
2)Interest Rates and Inflation
3)Market Pyschology
4)Government Action

Back 8

HOW EXCHANGE RATES ARE DETERMINED

1)Economic growth
2)Interest Rates and Inflation
3)Market Pyschology
4)Government Action

Front 9

The increase in value of goods and services produced by an economy

Back 9

economic growth

Front 10

the monetary authority in each country that regulates the money supply, issues curreny, and manages the exchange rate of the nation's currency relative to other currencies

Back 10

Central Bank

Front 11

an increase in the price of goods ans services so that money buys less than in preceding years

Back 11

Inflation

Front 12

persisitent annual double digit and indeed triple digit rates of consumer price increases

Back 12

Hyperinflation

Front 13

NOTE: Inflation occurs when 1) demand grows more rapidly than supply, or (2) the central bank increase the nations oney supply faster than output

Back 13

NOTE: Inflation occurs when 1) demand grows more rapidly than supply, or (2) the central bank increase the nations oney supply faster than output

Front 14

Governmen action to reduce the official value of its currency, relative to other currencies

Back 14

devaluation

Front 15

the annual accounting of all economic transactions of a nation with all other nations

Back 15

Balance of Payments

Front 16

NOTE: BRETTON WOODS: Following the war, some countries came together to energize interational commerice and devise a framwork for stablity in the internation monetary and fiancial systems. In 1944, 44 countries negotiated and signed the Bretton Woods Agreement. Bretton woods was a fixed exchange rate system that pegged the dollar to gold at a value of $35 to 1oz of Gold. and other nations begged their currency to the dollar. In the 60s the US broke away from the bretton woods agreement and started what most countries now use in a floating exchange system based on supply and demand.

Back 16

NOTE: BRETTON WOODS: Following the war, some countries came together to energize interational commerice and devise a framwork for stablity in the internation monetary and fiancial systems. In 1944, 44 countries negotiated and signed the Bretton Woods Agreement. Bretton woods was a fixed exchange rate system that pegged the dollar to gold at a value of $35 to 1oz of Gold. and other nations begged their currency to the dollar. In the 60s the US broke away from the bretton woods agreement and started what most countries now use in a floating exchange system based on supply and demand.

Front 17

An international agency that aims to stabilize currencies by monitoring the foreign exhange systems of member countries, and lending money to developing economies

Back 17

International Monetary Fund

Critized because its prescriptions often require national governments to undertake reforms that are painfull, at least in the short run. Some critics argue that the IMF harms countries by imposint to muchh austerity on them in times of fiancial distress

Front 18

An international agency that provides loans and technical assistance to low and middle-income countries with the goal of reducing poverty

Back 18

World Bank

Front 19

Exchange rates are determined daily by the forces of supply and demand

Back 19

Floating-exchange rate system

Front 20

pegged exchange rate system, the value of a currency is set relative to the value of another (or the value of a basket of currencies) at a specified rate

Back 20

Fixed-exchange rate system

Front 21

an exchange rate similar to a fixed exchange rate accept it does have at time government intervention through the Central Bank to insure that the value of the currency is within some range against the U.S. Dollar or some other important currency

Back 21

dirty float

Front 22

Refers to the insitutional framework, rules, and procedures by which natial currencies are exchanged for one aonther

Back 22

International Monetary System

Front 23

refers to the collective fiancial institutions that facilitate and regulate the flows of investment and capital funds worldwide.

Back 23

global financial system

Front 24

refers to the tendency of a financial or monetary crisis in one country to spread rapidly to others due to the ongoing worldwide financial integration

Back 24

Contagion

Front 25

KEY PLAYERS IN THE MONETARY AND FINANCIAL SYSTEMS

1)The Firm

2)National Stock Exchanges and Bond Markets

3)Commercial banks

4)Central banks (offical country national bank)

5)The Bank for International Settlements (The mission of BIS is to foster cooperation among central banks)

6)International Monetary Fund (promotes monetary cooperation, excange rate stability, and orderly exchange arrangements

7)World Bank (orginally known as the International Bank for Reconstruction and Development follwing World War II. Today the World Bank aims to reduce world poverty and is active in a range of development projects to bring water, electricity, and transporation infrastructure

Note that: The IMF focuses on countries' economic performance, the World Bank emphasizes longer-term development and the reduction of poverty. While the IMF makes short-term loans to help stablilize foreign exhange, the World Bank makes long-term loans to promote economic development

Back 25

KEY PLAYERS IN THE MONETARY AND FINANCIAL SYSTEMS

1)The Firm

2)National Stock Exchanges and Bond Markets

3)Commercial banks

4)Central banks (offical country national bank)

5)The Bank for International Settlements (The mission of BIS is to foster cooperation among central banks)

6)International Monetary Fund (promotes monetary cooperation, excange rate stability, and orderly exchange arrangements

7)World Bank (orginally known as the International Bank for Reconstruction and Development follwing World War II. Today the World Bank aims to reduce world poverty and is active in a range of development projects to bring water, electricity, and transporation infrastructure

Note that: The IMF focuses on countries' economic performance, the World Bank emphasizes longer-term development and the reduction of poverty. While the IMF makes short-term loans to help stablilize foreign exhange, the World Bank makes long-term loans to promote economic development

Front 26

A unit of account or a reserve asset, a type of currency used by central banks to supplement their existing reserves in transactions with the IMF

Back 26

Speacial Drawing Right (SDR)