Exchange Rates and Crises: Understanding the Concepts and Terminology, Quizzes of International Economic Relations

Download Exchange Rates and Crises: Understanding the Concepts and Terminology and more Quizzes International Economic Relations in PDF only on Docsity! TERM 1 Example of an exchange rate crisis DEFINITION 1 Argentina in 2002 leading to a governmental defaultthere has been 27 crisis in the 12 year period between 1997-2011 TERM 2 Definition of an exchange rate crisis DEFINITION 2 an event in which a currency loses more than 30% of its value in US dollar terms over one year, having changed less than 20% each of the previous years TERM 3 The difference in national income and expenditure leads to what current account? DEFINITION 3 expenditure> income = deficit TERM 4 Global imbalances DEFINITION 4 in recent years, there have been some large surplus countries, and some large deficit countries TERM 5 Wealth equation DEFINITION 5 assets-liabilitiesexternal wealth = foreign assets - foreign liabilitiesif...external wealth > 0 = creditorexternal wealth < 0 = debtor TERM 6 Appreciation effects DEFINITION 6 when appreciation happens in the home country, it leads to an increase in the relative price of its exports to foreigners and a decrease in the relative price of imports from abroad TERM 7 Depreciation effects DEFINITION 7 when depreciation occurs in a home country, then it leads to a decrease in the relative price of its exports to foreigners and an increasing in the relative price of imports from abroad TERM 8 Exchange rate regimes DEFINITION 8 refers to the categories that reflect policy choices made by governmentstwo general categories1. fixed exchange-rate regimes2. floating exchange-rate regimes TERM 9 Spot contracts make up what percentage of all forex transactions? DEFINITION 9 90%exchange rate always refers to the spot rate TERM 10 Derivatives DEFINITION 10 contracts with pricing derived from the spot ratetypes:forwardsswapsfuturesoptions TERM 21 real appreciation of the dollar DEFINITION 21 fewer goods needed in exchange for foreign goodsthis happens when the real exchange rate falls TERM 22 What explains deviations from PPP DEFINITION 22 1. Transaction costs2. Nontraded goods3. Imperfect Competition and legal obsticles4. price stickiness TERM 23 What is a better guide for current value of a currency? DEFINITION 23 the relationship between prices and GDP per person TERM 24 GNE DEFINITION 24 gross national expenditurethe total national spending on final goods serviceshas three components TERM 25 Three components of GNE (gross national expenditure) DEFINITION 25 1. Personal consumption expenditure (c) (consumption)2. Gross private domestic investment (I) (investment)3. Government consumption expenditures and gross investment (G) includes additions to capital stock TERM 26 Total Spending (GNE) DEFINITION 26 Total payments for final goods and services in the marketclosed economy? It must equal total sales by firms of final goods and services**intermediate goods are excluded from this counting to avoid double counting TERM 27 Firms use revenue in what two ways? DEFINITION 27 1. payments for intermediate goods and services2. income payments to factors of production, such as wages and salaries to labor, dividends and interest to capital, and rent to landowners TERM 28 Value added DEFINITION 28 what is leftover once intermediate purchases are deducted from total salesconsiders to be the measure of production in the economyalso called GDP TERM 29 GNI DEFINITION 29 gross national incomethe sum of factor income payments received by national entitiesin a closed economy...GNE=GDP=GNI TERM 30 Trade Balance DEFINITION 30 The difference between the payments recieved for exports and payments made for importsexports-imports TERM 31 GDP Equation DEFINITION 31 = GNE (gross national expenditure) + TB (trade balance) TERM 32 NFIA DEFINITION 32 Net factor income from abroad= EXfs (value of factor service exports) - IMfs (factor service imports)trade in factor services occurs when one country is paid income by another by another, in labor, capital, and landexample: if a foreign company builds a factory in the US, the profits transferred to the other country are payments by the US for imported capital services TERM 33 GNI Equation DEFINITION 33 gross national income=GDP + NFIA = GDP + (EXfs- IMfs)nfia= net factor income from abroad TERM 34 Trade Barrier DEFINITION 34 Refers to all factors that influence the amount of goods and serviced shipped across international bordersbarriers to trade change over time as policies, technology, change TERM 35 Comparative Advantage DEFINITION 35 A country has a comparative advantage in a good when it has a lower opportunity cost of producing than another country