Chapter 11 - The International Menetary And Financial Environment

Question 1

Exchange Rate

Answer 1

The price of one currency expressed in terms of another. It is the number of units one currency that can be exchanged for another

Question 2

Currency Risk

Answer 2

The risk that arises from changes in the price of one currency relative to another

Question 3

Foreign Exchange

Answer 3

All forms of money that are traded internationally, including foreign currencies, bank deposits, Chequers and electronic transfers

Question 4

Foreign Exchange Market

Answer 4

The global marketplace for buying and selling national currencies

Question 5

Central Bank

Answer 5

The monetary authority in each nation that regulates the money supply and credit, issues currency and manages the exchange rate of the nation’s currency

Question 6

Trade Surplus

Answer 6

The amount by which a nation’s exports exceed it’s imports for a specific period of time

Question 7

Trade Deficit

Answer 7

The amount by which a nation’s imports exceed it’s exports for a specific period of time

Question 8

Devaluation

Answer 8

Government action to reduce the official value of its currency, relative to other currencies

Question 9

Balance of Payments

Answer 9

The annual accounting of all economic transactions of a nation with all other nations

Question 10

International Monetary Fund IMF

Answer 10

An international agency that aims to stabilise currencies by monitoring the foreign exchange systems of member countries and lending money to developing economies

Question 11

World Bank

Answer 11

An international agency that provides loans and technical assistance to low and middle income countries with the goal of reducing poverty

Question 12

International Monetary System

Answer 12

The institutional framework, rules and procedures by which national currencies are exchanged for one other

Question 13

Global Financial System

Answer 13

The collective of financial institutions that facilitate and regulate investment and capital flows worldwide, such as central banks, commercial banks, and national stock exchanges

Question 14

Contagion

Answer 14

The tendency of financial or monetary crisis in one country to spread rapidly to others due to ongoing financial integration worldwide

Question 15

Islamic Banking

Answer 15

An interest-free banking system practiced in many Muslim and non-Muslim countries

Question 16

Monetary Intervention

Answer 16

The buying and selling of government securities by a central bank to maintain the exchange rate of a country’s currency at some acceptable level

Question 17

Special Drawing Right SDR

Answer 17

A unit of account or a reserve asset, a type of currency used by central banks to supplement their existing reserves in transactions with the International Monetary Fund IMF