particular if it concerns the future. In the case of the EU‚ a still growing world economy may come to the rescue. In Asia and Latin America cases‚ the common aspect of the crises is a fact that many countries experienced financial instability before the currency crisis. When the Peso crisis happened‚ the Mexican banking sector had been seriously vulnerable due to liberalization and privatization of financial sector. Financial liberalization in 1988 generated a rapid increase in bank lending pulled by the
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System Skill: Recognition 6) A special Drawing Right is a unit of account established by A) the Federal Reserve Bank. B) the World Bank. C) the International Monetary Fund. D) the European Central Bank. Answer: C Diff: 1 Topic: 2.1 History of the International Monetary System Skill: Recognition 8) Under the terms of Bretton Woods countries tried to maintain the value of their currencies to within 1% of a hybrid security made up of the U.S. dollar‚ British pound‚ and Japanese yen. Answer: FALSE
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Chinese currency‚ as well as from the abuse of workers’ rights. On the other hand‚ companies actually producing in the foreign countries – whether for the domestic market or for export – face debilitating and unsustainable disadvantages from both currency manipulation and violation of workers’ right in China. By 2004‚ the combined value of China’s exports and imports rose to 67% of its GDP‚ making China’s growth relied heavily on its international trading. The excess foreign exchange reserves resulting
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institutional arrangements that govern exchange rates. True False 2. A pegged exchange rate means the value of a currency is fixed relative to a reference currency. True False 3. A dirty float occurs when a country uses pegged exchange rates to value its currency. True False 4. The gold standard called for fixed exchange rates against the U.S. dollar. True False 5. The amount of a currency needed to purchase one ounce of gold was referred to as the gold par value under the gold standard. True False
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are importing more than they are exporting. This also means that there is an excess supply of pesos in the world market. Since they are on a fixed exchange rate‚ the government is going to have to intervene and buy back pesos using its official reserves account. If Mexico’s foreign exchange balance is unable to effectively buy back pesos‚ they will be forced to devalue. 2. Since the private capital account is gradually increasing‚ it means the peso needs to be devalued. Generally the current
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INTRODUCTION CURRENCY APPRECIATION:- An increase in the value of one currency in terms of another. Currencies appreciate against each other for various reasons‚ including capital inflows and the state of a country ’s current account. Typically‚ a Forex trader trades a currency pair in the hopes of currency appreciation of the base currency against the counter currency. CURRENCY DEPRICIATION:- A decrease in the value of a currency with respect to other currencies. This means that the depreciated
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Economics Exam Notes Question 1. (Chapter 31‚ pg759) * Impact of interest rate on spending * Analysis of events which change interest rate in the market * Policies to manage inflation/recession Impact of interest rate on the economy (ripple effect) To lower interest rate | | To increase interest rate | | | | | | Central bank buy securities in open market operations and increases money supply | | Central bank sell securities in open market operations and increases
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between an optimum currency area and a fixed exchange rate system. Optimum currency area is when a group of nation currencies are linked to through permanently fixed exchange rates and the conditions that would make such an area optimum. Fixed is when value of a country ’s currency‚ in relation to the value of other currencies‚ is maintained at a fixed conversion rate. What are the main advantages and disadvantages of an optimum currency area? The main advantage of optimum currency area is that more
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6 Exchange Rate Innovations 7 Investments in the Stock Market 7 Investments in the Bond Market 8 Foreign Exchange Reserves 9 Structure of Industries 10 The Banking System 10 Monetary Policy / Money Supply Growth 11 Foreign Debt 12 Capital Flight 12 Asian Currency Crisis 13 Philippines before the crisis 13 What caused the Asian Currency Crisis? The effect it had on the Philippines and other countries 13 Looking into the Future 17 Prevention as the Best
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DEVELOPMENT OF CURRENCY * THE FUNCTIONS OF CURRENCY UNIT 2 THE GLOBAL FOREIGN EXCHANGE MARKET * FOREIGN EXCHANGE TURNOVER * SPECULATION IS THE KEY DRIVER * FOREIGN EXCHANGE MARKET CHARACTERISTICS * REGULATION * Foreign Exchange Markets – sum up. * LEADING CURRENCIES * CURRENCY TRADING TRENDS * CURRENCY AS AN ASSET CLASS * Summary UNIT 3 EXCHANGE RATES AND THEIR MOVEMENTS * INTRODUCTION/DEFINITION. * FACTORS DETERMINING EXCHANGE RATES * CURRENCY MOVEMENT
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