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NYU International Economics - Final Exam (Chapters 10-14) Questions with Solutions
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NYU International Economics - Final Exam (Chapters 10-14)
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NYU International Economics - FinalExam (Chapters 10-14)
Balance of Payments - answer Record of the economic transactions between the
residents of one country and the rest of the world.
Double Entry Accounting - answer Arranging international transactions into a balance-
of-payments account that requires each transaction to be entered as a credit or debit.
Credit Transaction - answer A receipt of a payment from foreigners
Debit Transaction - answer One that leads to a payment to foreigners
Balance-of-payments structure - answer Current Account
Merchandise trade balance
Capital and Financial Account
Private Sector Financial Transactions
Special Drawing Rights - answer A new reserve asset created by the IMF as a
supplement to the existing reserves of member countries
Current Account Deficit - answerMeaning that there is an excess of imports over exports
Current Account Surplus - answerMeaning that there is an excess of exports over
imports
Foreign Exchange Market - answerOrganizational setting in which individuals,
businesses, governments, and banks buy and sell foreign currencies and other debt
instruments.
Foreign Exchange Market's 3 Levels - answer- Transactions between commercial banks
and commercial customers
- Domestic interbank market conducted through brokers
- Active trading in forex with banks overseas.
Types of Forex Transactions - answerSpot, Forward, and Swap
Forex Spot Transactions - answerOutright purchase or sale of a currency now, as in "on
the spot"
Forex Forward Transactions - answerReceiving or paying an amount of foreign currency
on a specific date in the future
, Forex Currency Swap - answerConversion of one currency to another at one point in
time.
Interbank Trading - answer- Retail transactions
- Wholesale transactions
Forex Bid Rate - answerPrice that the bank is willing to pay for a unit of foreign currency
Forex Offer Rate - answerPrice at which bank is willing to sell a unit of foreign currency
Forex Spread - answerThe difference between bid and offer rate
Currency Depreciation - answerMore units of a currency is required to purchase another
unit of a foreign currency
Currency Appreciation - answerFewer units of a currency is required to purchase
another unit of a foreign currency
IMM (International Monetary Market) - answerChicago Mercantile Exchange
Extension of the commodity futures market
Currency Option Trading - answerAgreement between buyer and seller to buy or sell a
financial asset at any time through a specified date
- Used by firms to hedge against risk
Exchange Rate Determination - answerExchange rate in the free market is determined
by supply and demand
Demand for the Foreign Exchange - answerDerives it demand from foreigners' demand
for domestic goods and assets
Supply for the Foreign Exchange - answerThe amount of foreign exchange offered in
the market and increases at various exchange rates.
Equilibrium Rate of Exchange - answerIs determined by market forces of supply and
demand
Exchange-Rate Indeex - answerWeighted average of exchange rates between domestic
currency and those of the nation's most important trading partners
Nominal Exchange-Rate Index - answerAverage value of the dollar is not adjusted for
changes in price levels in the US and trading partners.
Real Exchange-Rate Index - answerIndicates the average value of dollar based on real
exchange rates
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