chap 20

Question 1

exchange rate?

Answer 1

price of one country’s currency expressed in terms of another

Question 2

equilibrium price?

Answer 2

price at which the quantity of a good demanded at given time period equals the quantity supplied

Question 3

balance of payments?

Answer 3

summarizing record of a country’s international economic transactions in a given time period

Question 4

depreciation (currency)?

Answer 4

fall in the price of one currency relative to another

Question 5

appreciation?

Answer 5

rise in the price of one currency relative to another

Question 6

foreign exchange markets?

Answer 6

places where foreign currencies are bought and sold

Question 7

gold standard?

Answer 7

when countries fix the price of their currencies in terms of gold

Question 8

market shortage?

Answer 8

amount by which quantity demand exceeds quantity supplied at a given price

Question 9

balance of payments deficit?

Answer 9

an excess demand for foreign currency at current exchange rates

Question 10

foreign exchange reserves?

Answer 10

holdings of foreign currencies by official government agencies, usually the entrap bank or treasury

Question 11

gold reserves?

Answer 11

stocks of gold held by a government to purchase foreign exchange

Question 12

flexible exchange rates? what is it aka?

Answer 12

exchange rates are permitted to vary with market supply and demand conditions
- floating exchange rates

Question 13

managed exchange rates? why do the governments do this?

Answer 13

when governments intervene in foreign exchange markets to limit but not eliminate exchange rate fluctuations

Question 14

devaluation?

Answer 14

abrupt depreciation of a currency whose value was fixed or managed by the government