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25 Cards in this Set
- Front
- Back
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exchange rate
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price of one country's currency expressed in another country. rate at which one currency can be exchanged for another. effects business, BC exchange rate fees increase costs of business between countries and risk of rate fluctuations might result in loss discourages investment.
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floating exchange rate regime
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monetary policy where nation's currency is determine dby FOREX market through supply/demand of national currency relative to other currencies. floating changes freely and determined by market forces not gov. consequence of floating = self correcting BOP , deficits/surplus will be self corrected.
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fixed exchange rate
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monetary policy where value of nation's currency is determined by country's central bank, often fixed to certain range of another country's currency /gold. purpose is to maintain currency value within fixed value. provide greater exchange rate stability for exporters and foreign investors. drawback is that loses autonomy in monetary policy, since obligated not to allow value of currency to significantly change. gov maintain this stable price by having large foreign currency reserves either to increase ....see notes
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speculative attacks
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precipitous acquisition of assets by previously inactive speculators. can be instigated by large scale short sale of currency with fixed regime in order to provoke panic over gov ability to maintain its fixed rates and massive devalue of a currency. unique to fixed only!! countered with controls on intl capital mobility for a given currency.
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eli whitney
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US inventor, cotton gin. key invention of Industrial Rev. improved cotton production of South. before only long staple cotton was profitable, but it only grew in limited area on coast. cotton gin made short staple cotton profitable crop. increased efficiency 50x. strengthened slavery and turned south into one of the most important cotton producing areas.
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short staple coton
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produces dense sticky balls full of seeds. grows in more areas. cotton gin helped.
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navigation acts
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laws pssed by england, restriced use of foreign shipping for trade between England and colonies. wanted to promote british sea power and stop direct colonial trade with netherlands, france, and other european areas. lowered prices of england imports, denied raw materials to rivals while imposing British monopoly on provision of manufactured goods to colonies, weren't allowed to manufacture on their own. merchant ships were war ships and improved due to mercantilism. generated bigger fleet.
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Alexander Hamilton
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secretary of treasury, author of economic policies of washington admin. establishment of national bank, system of tariffs and better relations with britain were him. leader of federalist party, opposed democratic republican party, led by jefferson and madison.
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Mass Textile industry
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rise of textile industry dates from napoleonic wars, embargoof 1807 and war of 1812. francis cabot lowell est Boston manufacturing Co. in waltham MA, 1812, photographic memory. helped urbanize with his mill girls, 2/3 workers.
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repeal of corn laws
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legislative act of 1840s, marked shift in UK to free trade according to CA. corn laws were agricultural protectionism with high tariffs on corn wheat and other grains. originated during napoleonic wars and were justified on grounds of national security. 1846 repealed after potato famine of 45.
result of interplay between UK endowments and intl trade. abundant in capital labor and scarce in land. specialized in manufactured goods and imported food. corn laws went against CA by keeping UK grain producers in business at high cost to consumer. S-S theorem: predicts that owners of scarce factor, landlords, will support protectionism, while owner of abundant factors, capitalists/skilled labor, should champion the repeal. support was great in rural areas/ tory party/conservatives and oppositoin was from capitalists and labor in industrial areas/ whig party, free trade party. formed the anti corn law league. reform act of 1832 paved way for repeal by giving industrial districts more say. uneven distribution of rural lands. UK became first free trading nation. |
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FOREX market
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global market where currencies are exchanged. not physical, network of calls and internet between major banks, london, NY and tokyo. price of currency in FOREX is exchange rate, price of one currency measured with another. exchange rates are determined by equilibrating actions of buyers and sellers of currency in FOREX. demand/supply.
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Appreciation
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increase in value of asset over time. increased demand for it, or weakening supply, or change in inflation. appreciation causes currency to have more purchasing power, allowing more imports and exports.
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depreciation
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decrease in value of an asset. weakening demand, increasing supply or inflation change. causes currency to have less purchasing power, decreases imports and exports/ makes them more competitive abroad.
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Balance of Payments BOP Adjustment
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sum of nation's transactions with rest of the world. how much currency flows in and out due to sales and purchases.
floating: say the franc appreciates, lowers US demand for goods because they can't afford it, increases US exports to switz because US goods are now cheaper. results in decline of swiss exports and increase in imports form US> fixed: gov must manage currency. surplus: US demand pesos, therefore MX sells US pesos. Deficit: MX want more US goods, supply of pesos increases, peso is overvalued, gov intervenes by buying pesos with dollar reserves. MX then exhausts foreign money, then must use policies to increase demand for its currency by raising domestic prices. |
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mercantilism
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assert power and wealth, goals of national policy, via est colonies and regulate trade. opposite of free trade. wanted to keep import prices low and export prices artificially high by restricting colonies to their markets only.
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Napoleonic Wars, 1793-1814
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war in continental europe, often cut US from world economy due to embargoes, and isolation. however stimulated rise in manufacturing in US. new factories started with quick profits. drove domestic grain prices high in UK due to import shortage, lead to est of corn laws in 1815. protectionist policy. S-S says consequences not following CA.
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democrats, Party of South cotton
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when in power tariffs were low, when republicans in office, tariffs went up. civil war setled issue as democrats were forced out. republicans enacted protectionism policies. divergence interest in country, which is a consequence of S-S theory.
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antebellum tariffs
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tariffs were generally lower than after civil war. south was dependent on manufactured imports hurt and north faced competition form manufactured imports benefited.
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anti corn law league
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successor of anti corn law association, created in london 1836. initiated in 1838, supported by manufacturers and urban interests, goal to abolish corn laws. wanted to establish free trade and decrease food prices.
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Prime Minister Wiliam Peel
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helped repeal corn laws, broke from conservative protectionism triggered by great irish famine. tory agriculturalists opposed the repeal but peel believed free trade would reduce grain price and free food for irish.
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Balance of payments surpus
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imbalance in nation's balance of payments where payments made by country are less than payments received. floating: imbalance will self correct as currency appreciates, will cause increase in imports and decrease in exports. Fixed: gov corrects via selling national currency.
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Exchange rate plitics
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ASK JOY
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Exchange rate electoral cycle
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ASK JOY
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Francis Cabot Lowell
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MASS textile industrialist, founded Boston Manufacturing C. photographic memory. shows how industrialization can happen under isolation and shortage. in 1812.
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English Land aristocracy
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passed corn laws after napoleonic wars and grain import shortages characterized by it. S-S predicts that owners of scarce land should protect corn laws, and support was definitely in the rural areas/ tory party/conservatives. land aristocrats enjoyed disproportionate representation until reform act of 1832.
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