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20 Cards in this Set
- Front
- Back
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Nominal Exchange Rate |
The rate at which two currencies can be traded for each other.
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Parity
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The situation when one unit of one currency trades on the foreign exchange market for one unit of another currency; frequently abbreviated to "par". |
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Appreciation
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An increase in the value of a currency relative to another currency.
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Depreciation
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A decrease in the value of one currency relative to another currency.
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Flexible Exchange Rate
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An exchange rate whose value is not officially fixed but varies according to the supply of and demand for the currency in the foreign exchange market.
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Foreign Exchange Market
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The market on which currencies of various nations are traded for one another.
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Fixed Exchange Rate
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An exchange rate whose value is set by official government policy.
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Market Equilibrium Value of the Exchange Rate
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The exchange rate that equates the quantities of the currency supplied and demanded in the foreign exchange market. |
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Brenton Woods System
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An international monetary system under which most countries pegged their currencies to the U.S. dollar; it operated from the end of World War II until 1971.
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Revaluation
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An increase in the official value of a currency (in a fixed-exchange-rate system). |
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Devaluation
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A reduction in the official value of a currency (in a fixed-exchange-rate system).
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Overvalued Exchange Rate
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An exchange rate that has an officially fixed value greater than its fundamental value.
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Undervalued Exchange Rate |
An exchange rate that has an officially fixed value less than its fundamental value.
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Capital Controls
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Taxes or rules such as constraints on foreign exchange transactions that impede money flows between economics; they are sometimes used to prevent exchange rate fluctuations.
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International Reserves
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Foreign currency assets held by a government for the purpose the domestic currency in the foreign exchange market.
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Balance-of-Payments Deficit
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The net decline in a country's stock of international reserves over a year. |
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Balance-of-Payments Surplus
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The net increase in a country's stock of international reserves over a year.
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Speculative Attack |
A massive selling of domestic currency assets by financial investors.
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Real Exchange Rates |
The price of the average domestic good or service relative to the price of the average foreign good or service, when the prices are expressed in terms of a common currency.
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Law of One Price
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If transportation costs are relatively small, the price of an internationally traded commodity will be the same in all locations.
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