Understanding Gold Standard, Exchange Rates & IMF: Gold, Fixed & Floating Rates, Quizzes of Introduction to Business Management

Download Understanding Gold Standard, Exchange Rates & IMF: Gold, Fixed & Floating Rates and more Quizzes Introduction to Business Management in PDF only on Docsity! TERM 1 store; exchange; measure DEFINITION 1 -based on its scarcity and easily assessed level of purity, gold has been trusted as a way for people to ___value, ____ value, and _____ value since ancient times. TERM 2 gold standard DEFINITION 2 -1717 Sir Isaac Newton, put England on the ____ ____(the use of gold at an established number of units per currency) TERM 3 simplicity DEFINITION 3 the _____ of the gold standard was a large part of its appeal TERM 4 gold standard DEFINITION 4 under the ____ ____ a government cannot create money that is not backed by gold. Therefore, no matter how great the temptation to create more money for political advantage, a government cannot do so without the required amount of gold. Unfortunately, this discipline sacrifices a governments monetary flexibility. TERM 5 gold standard DEFINITION 5 the use of gold at an established number of unit per currency TERM 6 gold standard DEFINITION 6 Pros of _____ ____ -simplicity -widely trusted -imposes monetary discipline TERM 7 gold standard DEFINITION 7 Cons of ____ ____: -impractical with large trade flows - holding costs TERM 8 more DEFINITION 8 Exchange rate - influences of imports/exports -If currency is cheaper in your country leads to ____ exports TERM 9 Fixed Exchange Rate DEFINITION 9 A country's exchange rate regime under which the government or central bank ties the official exchange rate to another country's currency (or the price of gold). The purpose this system is to maintain a country's currency value within a very narrow band. Also known as pegged exchange rate TERM 10 -floating currency exchange rates: DEFINITION 10 ____ _____ ____ ___ rates that are allowed to float against other currencies and are determined by market forces. TERM 21 the euro, the Japanese yen, British pound sterling, and the US dollar. DEFINITION 21 the SDRs value is based on a basket of four currencies: TERM 22 Special Drawing Rights (SDR) DEFINITION 22 -created by the IMF to support the Bretton Woods fixed exchange rate system -neither a currency, nor a claim on the IMF, it is a potential claim on the freely usable currencies of IMF members TERM 23 daily ; 5 DEFINITION 23 -the SDR currency value is calculated ____(expect on IMF holidays or whenever the IMF is closed for business) and the valuation basket is reviewed and adjusted every __ years TERM 24 Balance of payments (BOP) DEFINITION 24 ___ __ ____: record of a countrys transactions with the rest of the world TERM 25 Balance of payments (BOP) DEFINITION 25 - a countrys record of global transactions -shows global demand for countrys currency-Exports > imports high demand for exporter currencys. Thus strengthens currency- Imports > exportslow demand, weak or devalued currency - possible currency or trade controls introduced TERM 26 BOP DEFINITION 26 -The ____ trend also helps managers predict what sort of changes in the economic environment might develop in the country. This prediction could impact their choice of strategic risks to take in a specific country. TERM 27 Bretton Woods system: DEFINITION 27 ____ ____ ___ the international monetary system in place from 1945-1971, with par value based on gold and the U.S. dollar. TERM 28 Bretton Woods systems DEFINITION 28 meetings established the IMF (the IMF Articles of Agreement contained the rules for a new international monetary system, the ___ ___ ____, also called the gold exchange standard and the fixed rate system. TERM 29 fixed exchange rates DEFINITION 29 the Bretton Woods system set up ___ ____ ___(specific currency exchange equivalence upheld by government) among member-nations currencies, with par value (stated value) based on gold and the US dollar, which was valued at $35 per ounce of gold. TERM 30 Reserves DEFINITION 30 ____are assets held by the central bank, used to back up government liabilities; reserves may include various hard currencies (Japanese yen, US dollar, British pound sterling, EU euro) and gold. TERM 31 Bretton Woods system DEFINITION 31 ____ ___ ____ supported huge international trade growth in the 1950ies and 1960ies. TERM 32 bretton woods system DEFINITION 32 Pros of ____ ___ ___ -Fixed rates -Supported trade growth TERM 33 bretton woods system DEFINITION 33 Cons of ___ ___ ___:-Balance of payment deficit of US-US government liabilities to foreign central banks-Shrinking US gold reserves TERM 34 -shows where your dollar will go farthest DEFINITION 34 Purchasing Power Parity and Big Mac Index what do they compare? China US issue, Spring Break