the institutional arrangements that countries adopt to govern exchange rates are known as the
floating exchange rate
a system, the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand ( foreign exchange market)
pegged exchange rate
currency value is fixed relative to a reference currency.
a system, of floating exchange rates, in which government occasionally intervens to change the direction of the value of the countries currency.
fixed exchange rate
system, fixes their currencies against each other
european monetary system
most nations of europe linked their currencies to prevent large fluctuations. 1979 to stabilize foreign exchange and counter inflation among members
had its origin in the use of gold coins as a medium of exchange, unit of account and store of value.
gold par value
the amount of a currency needed to purchase one ounce of gold
balance of trade equilibrium
reached when the income a nation's residents earn from exports equals money paif for imports
bretton woods system
in 1944, 44 countries met at bretton woods new hampshire to design a new international monetary system. created imf and wb. called for a system of fixed exchange rates that would be policied by imf.
internation monetary fund
to maintain order in the international monetary system
to promote general economic development
international bank for reconstruction and development
the world bank is also called the
countries using a _______ commit to converting their domestic currency on demand into another currency at a fixed exchange rate.
strict currency board
the int rate adjust automatically
When a speculative attack on the exchange value of a currency results in a sharp depreciation of hte currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate
When individuals and companies lose confidence in the banking system and withdraw their deposits in what is called a 'run on banks.'
foreign debt crisis
A situation in which a country cannot service its foreign debt obligations, whether private-sector or government debt