CH15

1 appreciation
2 capital mobility

3 depreciation
4 effective exchange rate index
5 exchange rate
6 foreign exchange market
7 forward exchange rate
8 forward transactions

9 interest parity condition

10 law of one price

11 quotas
12 real exchange rate

13 spot eschange rate

14 spot transactions
15 tariffs
16 theory of purchasing power parity (PPP)

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Increase in a currencys value.

A situation in which foreigners can easily purchase a countrys assets and the countrys
easily purchase foreign assets.
Decrease in a currencys value.
An index reflecting the value of a basket of representative foreign currencies.
The price of one currency in terms of another.
The market in which exchange rates are determined.
The exchange rate for a forward (future) transaction.
An exchange rate transaction that involves the exchange of bank deposits denominated in di
currencies at some specified future date.

The observation that the

domestic interest rate equals the foreign interest rate plus the expected appreciation in the f
currency.
The principle that if two or more countries produce an identical good, the price of this good
same no matter which country produces it.
Restrictions on the quantity of foreign goods that can be imported.
The rate at which domestic goods can be exchanged for foreign goods, meaning the price
goods relative to foreign goods denominated in domestic currency.

The exchange rate for the immediate (two-day) transaction.

The immediate exchange of bank deposits denominated in different currencies.

Taxes on imported goods.
The theory that exchange rates between any two currencies will adjust to reflect change
levels of the two countries.