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ECO 310, Final Study Guide

by: Tori Notetaker

ECO 310, Final Study Guide Eco 310

Marketplace > Murray State University > Eco 310 > ECO 310 Final Study Guide
Tori Notetaker
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About this Document

This study guide is a series of questions to help guide reading of chapters 10 and 11 in the text and includes vocabulary links to quizlet, and questions brought up in the class lectures. Good Luck!
Issues in the Global Economy
Mary Reed
Study Guide
global, Economics
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This 3 page Study Guide was uploaded by Tori Notetaker on Wednesday May 4, 2016. The Study Guide belongs to Eco 310 at Murray State University taught by Mary Reed in Spring 2016. Since its upload, it has received 45 views.


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Date Created: 05/04/16
ECO 310 Chp 10 & 11 Study Guide* Chapter 10 o In the Opening Case, how did the Brazilian Real fluctuate, why? What was the currency’s effect on Embraer? o Explain the effect of currency fluctuation. o What are the two main functions of The Foreign Exchange Market? o Explain Currency Conversion.  What are Currency Speculations, define and give examples. o Explain the Insurance against Foreign Exchange Risk.  Describe Spot Exchange Rates  Describe Forward Exchange Rates  Describe Currency Swaps  Define and give an example of Hedging. o What are three features of the Foreign Exchange Market? o Give an example of arbitrage o What is the vehicle currency of the Foreign Exchange Market? o What three factors impact future exchange rate movements? o Review and explain the theory of the Purchasing Power Parity. o Define and give an example of The Law of One Price. o What is the connection between money supply and price inflation? o What is the effect on supply and demand? o Describe Bolivia’s encounter with hyperinflation. o How does government policy effect currency and its inflation? o What are the factors and outcomes of empirical testing of Purchasing Power Parity? o According to Economic Theory, what do interest rates reflect? o Understand the Fisher Effect and its formula. o As well as the International Fisher Effect. o “Do interest rate differentials help predict future currency movements?” o Why would the expected rate in the United States be greater than in Japan according to  page 299? o How did George Soros trigger the bandwagon effect and what was the outcome? o Give a summary of Exchange Rate Theories o What is the benefit of Exchange Rate Forecasting? o Explain the Efficient and Inefficient Market Schools. o Describe the two approaches to forecasting. o When is a countries currency freely convertible? o Why would a government limit currency convertibility? o Define Countertrade and explain its possible benefits. o In Focus on Managerial Implications, define the importance of the five “exposures”. o How can these risks/exposures be managed? o In the Management Focus, how did the value of the euro affect Volkswagen? What could  Volkswagen have done to change the outcome originally? o Using Country Focus, describe quantitative easing. o Questions from the lecture: o What is the Foreign Exchange Market, and what is an Exchange Rater? o What is the function of the Foreign Exchange Market? o What factors are important to future exchange rates? o How are prices related to exchange rate movements? o How well does PPP theory work? o How do interest rates affect exchange rates? o How are exchange rates influenced by investor psychology? o Should companies invest in exchange rate forecasting services to help with               decision­making? o How should exchange rate forecasts be prepared? o What does the Foreign Exchange Market mean for international firms? o How can firms minimize translation and transaction exposure? o Key terms: o­chapter­10­terms­flash­cards/ Chapter 11 o From the Opening Case how did Iceland finance the expansion of their banking sector?  What were the results of the expansion? o List and describe the different exchange systems. o Define and explain the cases for floating and fixed exchange rates. Be able to  debate which one would be best for a specific economy. (322) o In what type of economy is the Pegged system popular? How does it affect  inflationary pressures in a country? (324) o What is the Gold Standard and what was its origin? o What powerful mechanism did the Gold Standard achieve? o What happened to the Gold Standard 1918 – 1939? o What were the causes to create the Bretton Woods System? o What two institutions came from the Bretton Woods System? Describe the roles  of these institutions o What is meant by fundamental disequilibrium?  o What’s the official name of the World Bank? o Under what two schemes does the World Bank lend money? o Explain the reasons behind the collapse of the Bretton Woods system. o What happened to the U.S. Balance­Of­Payments position? o What was the “Achilles’ Heel” of the Bretton Woods system? o What was the Jamaica Agreement? And what were its elements? o What were some of the unexpected shocks to the world monetary system? o What were the favorable factors that helped to overcome the trade deficit and devaluation of the dollar in the U.S.? o How are currency boards credible in the exchanging of currency? o What are draw backs of the currency boards? o Why have the IMF’s activities increased over the years? o Define and explain the financial crises of the past 30 years. o What were the triggering forces in the decline of the South Korean currency after  1997? o Give examples of some inappropriate policies and moral hazards of the IMF. o Explain whether the IMF has become too powerful an institution. o How has the IMF begun to change its policies? o In Country Focus (321), what have oil producers in countries such as Russia, Saudi  Arabia, and Venezuela been doing with the money they’ve received from oil consumers? o In Country Focus (327), how did the IMF, U.S. Government, and the Bank for  International Settlements help deal with the devaluation of the Mexican currency?  o Using Focus on Managerial Implications, explain the implications of the global monetary system for currency management and business strategy.  o What prevented the fall in the value of the dollar to the euro from hurting the Airbus  Company? (Management Focus) o Questions from the lecture: o What is the International Monetary System? And what role does it play in  determining exchange rates? o What followed the collapse of the Bretton Woods System? o How successful is the IMF at getting countries back on track? o What are the implications of the International Monetary System for managers? o Key Terms: o­310­chapter­11­terms­flash­cards/?new *These questions are meant as a guide to encourage reading the text.


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