1、Definition of TermChapter 12: balance of payments accounting, current account balance，official settlements balance，national savingbalance of payments accounting: 国际收支会计 accounting record of all monetary transactions between a country and the rest of the worldCurrent account balance （exports minus im
2、ports）: 经常项目差额net expenditure by foreigners on domestic goods and services.The official settlements balance :官方结算差额 is the negative value of official international reserve assets, and it shows a central banks holdings of foreign assets relative to foreign central banks holdings of domestic assets.Th
3、e bookkeeping offset to the balance of official reserve transaction .National saving = national income （Y） that is not spent on consumption （C） or government purchases （G）.Chapter 13: appreciation, exchange rate, real rate of return, forward exchange rate, spot exchange rate, interest parity conditi
4、on, vehicle currencyAppreciation is an increase in the value of a currency relative to another currency. Exchange rate: The price of one currency in terms of another is called an exchange rate.The real rate of return : The expected rate of return that savers consider in deciding which assets to hold
5、 is the expected real rate of return, that is, the rate of return computed by measuring asset values in terms of some broad representative of products that savers regularly purchase.forward exchange rates: Foreign exchange deals sometimes specify a value date farther away than two days30 days, 90 da
6、ys, 180 days, or even several years. The exchange rates quoted in such trans-actions are called forward exchange rates.The foreign exchange transactions we have been discussing take place on the spot: two par-ties agree to an exchange of bank deposits and execute the deal immediately. Exchange rates
7、 governing such on-the-spot trading are called spot exchange rates, and the deal is called a spot transaction.Interest parity condition: Interest parity implies that deposits in all currencies are equally desirable assets.Interest parity implies that arbitrage in the foreign exchange market is not p
8、ossible.vehicle currency: 周转货币 Because of its pivotal role in so many foreign exchange deals, the dollar is sometimes called a vehicle currencyChapter 14: aggregate money demand, money supply, exchange rate overshooting,Aggregate money demand:货币总和需求 aggregate money demand is the total demand for mon
9、ey by all households and firms in the economy.is just the sum of all the economys individual money demands.Money supply: the total stock of money in the economy; currency held by the public plus money in accounts in banks Exchange rate overshooting: the exchange rate is said to overshoot when its im
10、mediate response to a disturbance is greater than its long-run response.Chapter 15: Fisher effect, law of one price, nominal interest rate, purchasing power parity （PPP）, real exchange rate, relative PPPFisher effect: describes the relationship between nominal interest rates and inflation.Law of one
11、 price: the low of one price states that in competitive markets free of transportation costs and official barriers to trade（such as tariffs）,identical goods sold in different countries must sell for the same price when their prices are expressed in terms of the same currency.Nominal interest rate: 名
12、义利率 An interest rate is called nominal if the frequency of compounding （e.g. a month） is not identical to the basic time unit （normally a year）.Purchasing power parity（PPP）: the theory of purchasing power parity states that the exchange rate between two countries currencies equals the ratio of the c
13、ountries price levels.Real exchange rate: the rate of exchange for goods and services across countriesRelative PPP: states that the percentage change in the exchange rate between two currencies over any period equals the difference between the percentage changes in national price levels.Chapter 16:
14、AA schedule, inflation bias, aggregate demand, J-curve, DD schedule, pass-throughAA schedule: The schedule of exchange rate and output combinations that are consistent with equilibrium in the domestic money market and the foreign exchange market is called the AA schedule.inflation bias: Refers to th
15、e difference between the mean value and the target value of inflation according to the circulation by the basic model.DD schedule: The curve shows all combinations of output and the exchange rate for which the output market is in short run equilibrium.pass-through: The percentage from the exchange r
16、ate to import prices by which import prices rise when the home currency depreciates by 1 percent.Chapter 17: balance of payments crisis, bimetallic standard, capital flight, devaluation, gold exchange standard, gold standard, imperfect asset substitutability, managed floating exchange rates, perfect
17、 asset substitutability, reserve currency, revaluation, risk premium, self-fulfilling currency crises, sterilized foreign exchange intervention,balance of payments crisis: When a central bank does not have enough official international reserve assets to maintain a fixed exchange rate, a balance of p
18、ayments crisis results.bimetallic standard: the value of currency is based on both silver and gold.capital flight: financial capital is quickly moved from domestic assets to foreign assetsdevaluation: a devaluation occurs when the central bank raises the domestic currency price of foreign currencygo
19、ld exchange standard: halfway between the gold standard and a pure reserve currency standard is the gold exchange standardgold standard: gold acts as official international reserves that all countries use to make official international payments.imperfect asset substitutability: In general, foreign a
20、nd domestic assets may differ in the amount of risk that they carry: they may be imperfect substitutes.managed floating exchange rates: system in which governments may attempt to moderate exchange rate movements without keeping exchange rates rigidly fixed .perfect asset substitutability: the key fe
21、ature of our model that leads to these results is the assumption that the foreign exchange market is in equilibrium only when the expected returns on domestic and foreign currency bonds are the same.reserve currency: one currency acts as official international reserves.Revaluation: a revaluation occ
22、urs when the central bank lower the domestic currency price of foreign currencyrisk premium: default risk and exchange rate riskself-fulfilling currency crises: Expectations of a balance of payments crisis only worsen the crisis and hasten devaluation that occur in such circumstances often are calle
23、d self-fulfilling currency crises .sterilized foreign exchange intervention: central banks sometimes carry our equal foreign and domestic asset transactions in opposite directions to nullify the impact of their foreign exchange operations on the domestic money supply . this type of policy is called
24、sterilized foreign exchange interventionChapter 18: external balance, internal balance, expenditure-changing policy, price-specie-flow mechanism, expenditure-switching policyexternal balance: A countrys current account is neither so deeply in deficit that the country may be unable to repay its forei
25、gn debts in the future nor so strongly in surplus that foreigners are put in that position.Internal balance: The full employment of a countrys resources and domestic price level stability.expenditure-changing policy: Changing social needs or total expenditure level of the national economy policy, wh
26、ose purpose is to change aggregate demand to change the demand for foreign goods, services and financial assets, and achieve the balance of payments adjustment. price-specie-flow mechanism: Under the internationally common practice of the gold standard, a countrys international balance of payments c
27、an keep equilibrium automatically by the fluctuations of commodity price and the output or input of gold.expenditure-switching policy: The policies which can affect the international competitiveness of commodities and to increase their income relative to spending by changing the spending structure.C
28、hapter 19:destabilizing speculationdestabilizing speculation： it means that if foreign exchange traders saw that a currency was depreciating, it was argued, they might sell the currency in the expectation of future depreciation regardless of the currency s longer-term prospects; and as more traders
29、jumped on the bandwagon by selling the currency, the expectations of depreciation would be realized.Chapter 20:monetary efficiency gain, economic stability loss, optimum currency areasmonetary efficiency gain： the monetary efficiency gain from joining the fixed exchange rate system equals the joiner
30、s saving from avoiding the uncertainty, confusion, and calculation and transaction costs that arise when exchange rates float.economic stability loss： the extra instability caused by the fixed exchange rate is the economic stability loss fixed exchange rates are most appropriate for areas closely in
31、tegrated through international trade and factor movements.Short AnswerChapter 131.The Effect of Changing Interest Rates on the Current Exchange RateAn increase in the interest paid on deposit of a currency causes that currency to appreciate against foreign currencies.A rise in dollar interest rates causes the dollar to appreciate against the euro.A rise in euro interest rates causes the dollar to depreciate against the euro.2.The Effect of Changing Expectations on the Current Exchange RateA rise in the expecte
