The Foreign Exchange Market and Exchange Rates (Edexcel A-Level Economics A): Flashcards
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Practise the cards
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Exchange rate
Exchange rate
Price of one currency in terms of another currency
Fixed exchange rate system
Fixed exchange rate system
Govt fixes currency value vs another via market intervention
Dollar Standard (Bretton Woods)
Dollar Standard (Bretton Woods)
Post-WWII fixed rate system with currencies pegged to US dollar
Foreign exchange reserves
Foreign exchange reserves
Stocks of foreign currency & gold held by central bank
Devaluation
Devaluation
Govt reduces currency price under fixed exchange rate system
J-curve effect
J-curve effect
Devaluation initially worsens current account before improving
Marshall-Lerner condition
Marshall-Lerner condition
Sum of export & import demand elasticities must exceed 1
Floating exchange rate system
Floating exchange rate system
Exchange rate finds its own level without govt intervention
Hot money
Hot money
Funds moved globally seeking best return on investment
Depreciation (exchange rate)
Depreciation (exchange rate)
Fall in exchange rate under a floating system