Until August 1971, industrialized countries around the world maintained a fixed exchange rate of their currencies with the US dollar, which was linked to gold. The gold standardized system was called the Bretton Woods Fixed Exchange Rate System. This system collapsed in 1971, and since then, the dollar has not been linked to gold.

Based on your understanding of the international monetary system, complete the following statements:

• A exchange rate is the quoted price for a unit of foreign currency to be delivered at a specified date in the future.

• The government does not set a exchange rate, which means that supply and demand in the market determine the currency’s value.

• When American customers import more from Europe than they export to Europe, the euro relative to the dollar.

• The of a currency refers to an increase or decrease of the stated par value of a currency whose value is fixed.

• Under a floating regime, supply and demand for the currency determine the exchange rate. Currencies under such a regime are called currencies.

• A occurs when a country agrees to exchange its own currency for a specified foreign money unit at a fixed exchange rate and legislates domestic currency restrictions unless it has the foreign currency reserves to cover requested exchanges.

Options
1- Forward, spot
2- Pegged, Floating
3- appreciates, depreciates
4- devaluation or revaluation, depreciation or appreciation
5- freely, managed 6- convertible, nonconvertible
7- fixed-peg arrangement, currency board arrangement

Explanation:

A forward exchange rate is the quoted price for a unit of foreign currency to be delivered at a specified date in the future.

The government sets a fixed exchange rate that is allowed to fluctuate only slightly (if at all) around the par value.

When American customers import more from Europe than they export to Europe, the euro appreciate relative to the dollar.

The depreciation or appreciation of a currency refers to a decrease or increase, respectively, in the foreign exchange value of a floating currency.

Under a managed floating regime, the government plays a significant role in managing the exchange rate by manipulating the currency's supply and demand.

Currencies under such a regime are nonconvertible currencies.

Explanation:

• A forward exchange rate is the quoted price for a unit of foreign currency to be delivered at a specified date in the future.

• The government does not set a floating exchange rate, which means that supply and demand in the market determine the currency’s value.

• When American customers import more from Europe than they export to Europe, the euro depreciates relative to the dollar.

The revaluation of a currency refers to an increase or decrease of the stated par value of a currency whose value is fixed.

• Under a freely floating regime, supply and demand for the currency determine the exchange rate. Currencies under such a regime are called convertible currencies.

• A fixed-peg arrangement occurs when a country agrees to exchange its own currency for a specified foreign money unit at a fixed exchange rate and legislates domestic currency restrictions unless it has the foreign currency reserves to cover requested exchanges.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.