Final Exam Study Guide Chapter 16 -Balance of Payments -Debit item, Credit item, Unilateral Transfer -Current Account, Capital Account, Financial Account -Direct Investments -Surplus vs deficit for all of the above -Official International Reserves -Overall Balance -International Investments Position -Lender/Borrower vs Creditor/Debtor Chapter 17 -Foreign exchange market, sectors of the market -Interbank trading and reasons for engaging -Retail sector -Spot exchange rate, Forward exchange rate -Vehicle Currency -Floating exchange rate vs fixed exchange rate -Depreciation/appreciation vs devaluation/revaluation -Supply and Demand, including graphing -Effect of exports -Effect of imports -Effect of financial assets inflow/outflow -Calculate government action needed to fix exchange rates -Arbitrage -Calculate arbitrage and triangular arbitrage profits -How markets correct/eliminate arbitrage Chapter 19 -Long, medium and short term trends/variability -Asset Market Approach -Area of focus -Effect of each movement in each variable on exchange rates -Bandwagon effect -General conclusions -Purchasing Power Parity Approach -Law of One Price -Absolute Purchasing Power Parity -Relative Purchasing Power Parity -Predictions about long-term trends -Monetary Approach -Predictions/implications -Quantity Theory of demand for money -Quantity theory equation for exchange rates and PPP -Effect of changes in variables on exchange rate -Short run effect on long-term trends -Overshooting -Four ways to measure exchange rates