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Internat Bus Ch 7
| Question | Answer |
|---|---|
| Foreign Exchange rate | The price of one currency in terms of another |
| Appreciation | An increase in the value of the currency |
| Depreciation | A loss in the value of the currency |
| Balance of payment (BOP) | A country's international transaction statement, which includes merchandise trade, service trade, and capital movement |
| Floating (flexible) exchange rate policy | a government policy to let supply-and-demand conditions determine exchange rates |
| Clean (free) float | a pure market solution to determine exchange rates |
| Dirty (managed) float | using selective government intervention to determine exchange rates |
| Fixed exchange rate policy | A government policy to set the intervention to determine exchange rate of currency relative to other currencies |
| Target exchange rate (crawling band) | specified upper or lower bounds within which an exchange rate is allowed to fluctuate |
| Peg | a stabilizing policy of linking a developing country's currency to a key currency |
| Bandwagon effect | the effect in investors moving in the same direction at the same time, like a herd |
| Capital flight | a phenomenon in which a large number of individuals and companies exchange domestic currency for a foreign currency |
| Gold Standard | A system in which the value of most major currencies was maintained by fixing their prices in terms of gold |
| Common denominator | A currency or commodity to which the value of all currencies are pegged |
| Bretton woods systems | a system in which all currencies were pegged at a fixed rate to the US dollar |
| Post-Bretton Woods systems | A system flexible exchange rate regimes with no official common denominator |
| International Monetary Funds (IMF) | An international organization that was established to promote international monetary cooperation, exchange, stability, and orderly exchange arrangements |
| Quota | The weight a member country carries within IMF, which determines the amount of its financial contribution, its capacity to borrow from the IMF, and its voting power |
| Foreign exchange market | The market where individuals, firms, governments, and banks buy and sell foreign currencies |
| Forward Transaction | A foreign exchange transaction in which participants buy and sell currencies now for future delivery |
| Currency hedging | A transaction that protects traders and investors from exposure to the fluctuations of the spot rate |
| Forward discount | A condition under which the forward rate of currency relative to another currency is higher than the spot rate |
| Forward Premium | a condition under which the forward rate of one currency relative to another currency is lower than the spot rate |
| Currency Swap | a foreign exchange transaction between two firms in which one currency is converted into another at Time 1, with an agreement to revert it to the original currency at a specified Time 2 in the future |
| Offer Rate | the price to sell a currency |
| Bid rate | the price to buy a currency |
| Spread | the difference between the offer rate and the bid rate |
| Currency risk | the potential for loss associated with fluctuations in the foreign exchange market |
| Strategic hedging | spreading out activities in a number of countries in different currency zones to offset any currency losses in one region through gains in other regions |
| currency board | a monetary authority that issues notes and coins convertible into a key foreign currency at a fixed exchange rate |
Created by:
melinda_rangel