AUD ARS ALL BRL BGN BOB COP

WHAT FITS HERE?
domestic ~
stable ~
foreign ~
weak ~
hard ~
convertible ~
common ~
national ~
(ex)change ~
convert ~ (to)
buy/sell ~
devalue/revalue ~
peg/fix ~ (to)
~ rises/falls
~ floats
~ fluctuates

one word fit all: CURRENCY (n.)
Adjective + currency
domestic ~
stable ~
foreign ~
weak ~
hard ~
convertible ~
common ~
national ~
Verb (vt*) + currency (object)
(ex)change ~
convert ~ (to)
buy/sell ~
devalue/revalue ~
peg/fix ~ (to)
currency + verb (vi**)
~ rises/falls
~ floats
~ fluctuates
*transitive – followed by a direct object
**intransitive – no dir. object

Currencies
the US dollar (USD / US$)
the euro (EUR / €)
the yen (JPY / ¥)
the British pound (GBP / ₤)
the kuna (HRK)
the euro but 10.000 euros
The dollar has slipped by around 3% against
the yen and the euro since November.
______________________________________________________________________________________________________________________________________
Their house is now worth 250.000 euros.
______________________________________________________________________________________________________________
For deposits in amount over USD 10.000,
EUR 10.000 or PLN 50.000

Introduction
a country’s relative level of economic health. / Aside from factors / is one of the most important determinants of / such as interest rates and inflation, / the exchange rate
Aside from factors such as interest ratesAside from factors such as interest rates and inflationAside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a country's relative level of economic health.

Intro. continued
which is critical to / play a vital role in / almost every free market economy / a country’s level of trade / Exchange rates / in the world.
Exchange rates play a vital role in a country's level of trade, which is critical to almost every free market economy in the world.

Exchange rate movements affect a nation's trading relationships with other nations:
makes / A higher currency / a country’s exports / cheaper / more expensive and / imports / in foreign markets.
A higher* currency makes a country's exportsA higher* currency makes a country's exports more expensive and imports cheaper in foreign markets.
* currency appreciates
When the exporter’s currency appreciates, exports are becoming less / more profitable for the exporters and less / more expensive for the importers.

Exchange rate movements affect a nation's trading relationships with other nations:
makes / A higher currency / a country’s exports / cheaper / more expensive and / imports / in foreign markets.
A higher* currency makes a country's exportsA higher* currency makes a country's exports more expensive and imports cheaper in foreign markets.
* it appreciates
When the exporter’s currency appreciates, exports are becoming less profitable for the exporters and more expensive for the importers.

A lower currency / a country’s / makes / exports / and imports / cheaper / more expensive / in foreign markets.
A lower* currency makes a country's exports cheaper and its imports more expensive in foreign markets.
* currency depreciates
When the exporters’ currency depreciates, exports become _______ in the destination market.

A lower currency / a country’s / makes / exports / and imports / cheaper / more expensive / in foreign markets.
A lower* currency makes a country's exports cheaper and its imports more expensive in foreign markets.
* currency depreciates
When the exporters’ currency depreciates, exports become cheaper in the destination market. www.investopedia.com

Exchange rates
MK, U 26

Exchange rate is... (note: prepositions)
the amount of one currency that can be bought with another
The exchange rate is 7.4 kunas to the euro.
The exchange rate is 5.48 kunas to the USD.
the price at which one currency can be bought
a rate at which one currency can be exchanged into / for another currency.
value one currency in terms of other
€ 1 = HRK 7.4
the conversion rate of every € to HRK

Why do companies, institutions and people buy currencies?
How is the value (the exchange rate) of the money in your pocked determined?
Has the value HRK increased or decreased in the past few months?
Has it increased or decreased since the summer? Why?
Is the exchange rate of HRK fixed?
What do we call this type of exchange rate?
FLOATING
Is it freely floating?

Which of the three rates are described below?
FIXED, MANAGED FLOATING or FLOATING E.R.?
1. a rate which is set by the govt. (central bank) only........
2. a rate which is determined by the private market through supply and demand ............
3. its value will decrease only if demand is low (and vice-versa) .................
4. it does not change before it is centrally decided ...........
5. if the rate changes more than the central bank allows, the bank intervenes (buys or sells the currency) ......
6. based on the free market only........
7. its value will rise only if demand is high .................
8. a combination of the other two types ............
9. example of intervention in the economy ............

Which of the three rates are described below?
FIXED, MANAGED FLOATING or FLOATING E.R.?
1. a rate which is set by the govt. only FIXED E.R.
2. a rate which is determined by the private market through supply and demand FLOATING E.R.
3. its value will decrease only if demand is low (and vice-versa) FLOATING E.R.
4. it does not change before it is centrally decided FIXED
5. if the rate changes more than the central bank allows, the bank intervenes (buys or sells the currency) MANAGED FLOATING E.R.
6. based on the free market only FLOATING
7. its value will rise only if demand is high FLOATING
8. a combination of the other two types MANAGED FLOAT.
9. example of intervention in the economy FIXED E.R., MANAGED FLOATING E.R.
www.investopedia.com

Read EXCHANGE RATES, pg. 1
MK, U 26, p 128 and match with a heading
The Bretton-Woods Agreement of 1944 established ______ exchange rates, defined in terms of ______ and the US dollar. Between 1944 and 1971 many currencies were _______ ______ the US dollar, i.e. their parities with the US dolar were fixed. One US dollar was a promissory note issued by the US Tresury and could be exchanged for 1/35th of an ________ of gold. Under this system, fixed exchange rates could only be adjusted (revalued or _________) with the agreement of the ____________ _____________ _____________.

EXCHANGE RATES, pg. 1
MK, p 128 – HEADING: Gold convertibility
The Bretton-Woods Agreement of 1944 established fixed exchange rates, defined in terms of gold and the US dollar. Between 1944 and 1971 many currencies were pegged against the US dollar, i.e. their parities with the US dolar were fixed. One US dollar was a promissory note issued by the US Tresury and could be exchanged for 1/35th of an ounce of gold. Under this system, fixed exchange rates could only be adjusted (revalued or devalued )with the agreement of the International Monetary Fund.

The Bretton-Woods system of gold __________ and pegging ________ the dollar was abandoned in 1971, because following inflation, the Federal Reserve did not have enough gold to _________ its currency.
Say which: devaluated or revaluated
An overvalued currency had to be __________.
An undervalued currency had to be _________.
Currencies could only be adjusted with the agreement of the ______.

The Bretton-Woods system of gold convertibility and pegging against the dollar was abandoned in 1971, because following inflation, the Federal Reserve did not have enough gold to guarantee its currency.
Say which: devaluated or revaluated
An overvalued currency had to be devaluated.
An undervalued currency had to be revaluated.
Currencies could only be adjusted with the agreement of the IMF.

Please, read pg. 2 & match with a heading
Most western countries have had __________ exchange rates ever since 1971. This means that exchange rates are determined by the market ________ - the quantities _______ and ______. If demand exceeds supply, the price will ______; if supply exceeds demand, the price of a currency will _______. Milton Friedman, for example, was a __________ of freely floating exchange rates. He ________ that currencies would automatically settle at stable rates which would ______ underlying economic _________. However, proponents of freely floating exchange rates ____________ the impact of speculation.

Pg. 2 – heading: Market forces
Most western countries have had floating exchange rates ever since 1971. This means that exchange rates are determined by the market forces - the quantities bought and sold. If demand exceeds supply, the price will rise; if supply exceeds demand, the price of a currency will fall. Milton Friedman, for example, was a proponent of freely floating exchange rates. He argued that currencies would automatically settle at stable rates which would reflect underlying economic conditions. However, proponents of freely floating exchange rates underestimated the impact of speculation.

Read pg. 3 & match with a heading
PPP stands for _______ _______ ______.
Purchasing power – the ability to buy things
Parity – the state of being the same or equal
If HRK and GBP have PPP, an amount of HRK needed to buy particular goods in Croatia will buy ________ amount of goods in the United Kingdom when exchanged into GBP.
If floating exchange rates gave PPP, the cost of a given selection of goods would be the same in different countries.
Floating exchange rates do not give PPP because of currency ____________.
As much as ____% of world’s currency transactions are purely speculative.

Pg. 3 – heading: Parity and speculation
PPP stands for purchasing power parity.
Purchasing power – the ability to buy things
Parity – the state of being the same or equal
If HRK and GBP have PPP, an amount of HRK needed to buy particular goods in Croatia will buy the same amount of goods in the United Kingdom when exchanged into GBP.
If floating exchange rates gave PPP, the cost of a given selection of goods would be the same in different countries.
Floating exchange rates do not give PPP because of currency speculations.
As much as 95% of world’s currency transactions are purely speculative.

Please, read pgs. 4 & 5
match with headings
Match to create collocations used in pgs. 4&5
intervene currency reserves
hedge contracts
raw planning
futures markets
forward of the Euro
export against currency fluctuations
establishment materials
foreign in exchange markets

Pg. 4 – Counteracting speculation
Pg. 5 – Market interventions
Match to create collocations used in pgs. 4&5
intervene in exchange markets reserves
Hedge against currency fluctuations
raw materials
futures contracts
forward planning
export markets
establishment of the Euro
foreign currency

Comprehension: Write questions
_____ _____ gold convertibility?
____ ____ the Federal Reserve end the system of gold convertibility in 1971? OR
____ ____ gold convertibility end in 1971?
3. ____ ___ a floating exchange rate determined?
4. _____ ____ happen if there was PPP? OR
_____ _____ happen if currencies were correctly valued?
5. ____ ___ speculators buy foreign currencies?
6. ____ _______ of world currency transations ___ purely speculative?

Comprehension: Write questions
What was gold convertibility?
Why did the Federal Reserve end the system of gold convertibility in 1971? OR
Why did gold convertibility end in 1971?
3. How is a floating exchange rate determined?
4. What would happen if there was PPP?
What would happen if currencies were correctly valued?
5. Why do speculators buy foreign currencies?
6. What proportion of world currency transations are purely speculative?

7. ____ ____ companies ____ to protect themselves against currency fluctuations?
8. ____ ____ governments and central banks attempt to influence the value of their currency?
9. _____ _____ attempts to “manage” a floating exchange rate have a limited succes?
9. _____ ____ governments’ or central banks’ attempts to influence exchange rates not very successful?

7. How can companies try to protect themselves against currency fluctuations?
8. How can governments and central banks attempt to influence the value of their currency?
9. Why do attempts to “manage” a floating exchange rate have a limited succes? OR
Why are governments’ or central banks’ attempts to influence exchange rates not very successful?
Vocabulary, p 129

Vocabulary, p 129
1 revaluate
2 devaluate
3 floating
4 proponents
5 depreciate
6 appreciate
7 hedge
8 fluctuations
9 futures contracts

Vocabulary, p 129
1 revaluate
2 devaluate
3 floating
4 proponents
5 depreciate
6 appreciate
7 hedge
8 fluctuations
9 futures contracts

Vocabulary, p 129
1 revaluate
2 devaluate
3 floating
4 proponents
5 depreciate
6 appreciate
7 hedge
8 fluctuations
9 futures contracts

Listening 1:
Currency flows and the Tobin Tax
“Hot money” is s___________ money that is invested in a c______ for a very short time, which means that it is f________ in and out of a country very q________.
I__________ u_________ and falling o_________.
Tobin Tax is a very s_____ t_____ on currency p______ and currency s_______. It is d_____ to reduce c______ s________.

Listening 1:
Currency flows and the Tobin Tax
“Hot money” is speculative money that is invested in a currency for a very short time, which means that it is flowing in and out of a country very quickly.
Increased unemployment and falling output.
Tobin Tax is a very small tax on currency purchase and currency selling. It is designed to reduce currency speculations.

Listening 1:
Currency flows and the Tobin Tax – cont.
4. “Highly l_______” currency t______ is b______ or selling currency with b______ money.
5. It would probably r_____ or “d_____ down” c______ trading and c________ f________.
6. ______ makes global c________ possible.

Listening 1:
Currency flows and the Tobin Tax – cont.
4. “Highly leveraged” currency trading is buying or selling currency with borrowed money.
5. It would probably reduce or “dampen down” currency trading and currency fluctuations.
6. ICT makes global coordination possible.
ICT is i________ and c________ t________.

Listening 1:
Currency flows and the Tobin Tax – cont.
4. “Highly leveraged” currency trading is buying or selling currency with borrowed money.
5. It would probably reduce or “dampen down” currency trading and currency fluctuations.
6. ICT makes global coordination possible.
ICT is information and computer technology.

Listening 2: Developing Africa
1. Because they won’t get a s________ r______ of return, or a p_______.
2. Africa would get a s________ social rate of r_______: better education, better economic g_____, better standards of living, longer l_______ e_________.

Listening 2: Developing Africa
1. Because they won’t get a sufficient rate of return, or a profit.
2. Africa would get a significant social rate of return: better education, better economic growth, better standards of living, longer life expectancy.

1st Progress test, 18 April, 2011
12.00 - group 11_1 13.00 – group 11_2
Topics covered: → Reader, p 1: all but Graph
Meetings (R) Description & Finance
Report writing (R)
Marketing
Products (R + MK 11)
Marketing (R + MK 12)
Advertising (R + MK 13)
Trade
Retail and Wholesale, visible - invisible (R)
International trade, barriers to free trade (R + MK27)
Banking
Banking (R + MK 14)
Insurance (R)
Central banking (R)
Exchange rates (MK 26)

Preparing for the written and oral exam
read each relevant text
underline unknown words/expressions
find their meaning (dict., note-book, slides, web,...)
make sure you understand all the text
consider the various related texts and materials as elements contributing to your general understanding of a certain topic
see which of the words/expressions in the texts were important for this topic (slides, notebook, vocabulary sections in MK and Reader)
explain their meaning in simple English
retell the main message of each text orally
be prepared to discuss various topics and present your personal views
Think what ex. could be expected in the test