Unit 6. International Finance

I. Remember the words:

- exchange rate - валютний курс

- supply of foreign exchange - пропозиція іноземної валюти

- demand for foreign exchange - попит на іноземну валюту

- appreciation of currency - підвищення валютного курсу

- foreign exchange market - ринок іноземної валюти

- balance-of-payment deficit - дефіцит платіжного балансу

- balance-of-payments surplus - активне сальдо платіжного балансу

- gold reserve - золотий запас

II. Read and translate the text:

International trade would be inefficient without foreign exchange markets. We are able to exchange dollars for any national currency we desire. Thus an exchange rate is simply the price of one currency in terms of another.

Depreciation of a currency refers to the fact that one currency has become cheaper in terms of another. The other side of depreciation is appreciation, an increase in value of one currency as expressed in another country’s currency. Whenever one currency depreciates, another currency must appreciate.

Exchange rates change for the same reasons that any market price changes. Among the important sources are:

- relative income changes;

- relative price changes;

- changes in product availability;

- speculation.

All of these kinds of changes are taking place every minute of every day. Places

where foreign currencies are bought and sold are foreign exchange markets.

Government may buy and sell foreign exchange for the purpose of narrowing rather than eliminating exchange rate movements.

III. Answer the following questions:

1. What makes international trade so easy?

2. What is an exchange rate?

3. Give examples of exchange-rate terminology.

4. What are the reasons for the exchange rate changes?

IV. Fill in the blanks with appropriate words:

narrowing foreign currency fix an increase cheaper gold standard

1. Depreciation of currency refers to the fact that one currency has become … in terms of another one.

2. Appreciation is … in value of one currency as expressed in another country’s currency.

3. One way to eliminate fluctuations (коливання) in exchange rates is to … their value.

4. To fix exchange rate, each country may define the worth of its currency in terms of ….

5. A balance-of-payments deficit is an excess demand for … at current exchange rates.

6. Government may buy and sell foreign exchange for the purpose of … exchange-rate movements.

V. Read and dramatize the following dialogue:

A: The demand for foreign currency originates in many ways. First there is a

demand for imported products.

B: In fact to acquire French wines, German cars or Japanese stereo equipment

we need foreign money.

A: Yes, I quite agree with you. Foreign travel by Americans also generates a

demand for foreign currency.

B: Certainly, when you are travelling, you need foreign currency to pay for

transportation, hotel rooms, food and anything else you wish to buy and can

afford. Even if you use U.S. dollars or traveler’s checks, the owner of such

money will exchange them for local money.

A: One can’t but mention that U.S. corporations demand foreign exchange too.

General Motors builds cars in Germany, Coca-Cola produces Coke in China.

In nearly every such case, the US firm must first build or buy some plant and

equipment, using another country’s factors of production. This activity

requires foreign currency and thus becomes another component of our

demand for foreign currency.

B: And what about investment opportunities? It’s of common knowledge that

foreign producers often make direct investments in the USA.

A: For instance Shell and BP gas stations are a familiar example of direct

foreign investment as are Honda in Ohio and Volvo in Virginia. In making

such investments, foreign firms must first demand US currency that can be

used to buy US factors of production.

VI. Make up your own dialogue using the following expressions:

foreign-exchange markets domestic prices

the demand of foreign currency to fix exchange rates

exchange rate flexible exchange rates

to exchange currency appreciation of currency

Дата добавления: 2014-11-29