Ch.10: Understanding Foreign Exchange
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16 terms
Terms | Definitions |
|---|---|
 appreciate | to increase in value, especially referring to foreign currency |
| balance of payment | a record of payments that one country makes to and receives from all other foreign countries. |
| capital account | the account that represents all transactions between domestic and foreign residents involving a change of asset ownership. A foreign investor acquiring a domestic asset represents a domestic capital account surplus. |
| current account | the account that represents all transactions between domestic and foreign residents involving transaction of goods or services. A foreigner purchasing a domestic good or service represents a domestic current account surplus. |
| deficit | a nation that imports more than it exports, resulting in a deficit balance of trade. |
| depreciate | to decrease in value, especially referring to foreign currency. |
| devalue | a lowering of the agreed-upon value of a country's money, in a system of fixed exchange rates. |
| euro | currency of the European Monetary Union introduced in January 1999 |
| European Monetary System (EMS) | A quasi-fixed exchange rate system among several European countries established in 1979 |
| European Monetary Union | The formal union European countries to form a common market for goods and services. |
| fixed exchange rate | an international financial system in which rates of exchange between the values of different countries' currencies are maintained at agreed-upon levels. |
| floating exchange rate | an international financial system in which rates of exchange between the values of different countries' currencies fluctuate according to supply and demand in the marketplace. |
| foreign exchange rate | the value of a unit of one nation's money in terms of another nation's money. |
| International Monetary Fund | An international organization set up in 1944 to supervise exchange rates and to promote orderly international financial conditions. |
| international reserve | reserves held by one country usually in the form of gold or int he money of another country. |
| managed floating | the international financial system currently in use, in which major nations intervene to influence foreign exchange rates by buying and selling currencies. |
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