Where the exchange rate is determined by the market demand and supply of the currency in the foreign exchange market
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Fixed Exchange Rate
Where the Central Bank intervenes in the currency market so that the exchange rate stays close to the ER target ( in the EU this is between a 15% and -15% constraint band)
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Monetry Convergence
This is the alignment of the monetry policy so that long term intrest rates must be within 2% of the three lowest in the EU and exchange rates must be kept within the fluctuation bands of the ERM
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Fiscal Convergence
This is the alignment of fiscal policy so that the governments budget deficit must be lower thatn 3% of GDP and total government debt must not be higher that 60% of GDP
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Capital Flight
A situation when investors move their investments out of a particular country because of a fear of country specific risks or politcal instability, or because of the lure of higher returns in a different country
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Economic Growth
This is the % change in GDP over a specific period of time period, it increases peoples standard of living and allows them to access more goods and services
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Economic Development
This cosiders not only the material factors of economic growth, but the non-material aspects of life such as long life, healthy life and social choices.
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The Economic Cycle
The economic cycle is divided into 4 sections, Boom, recession,slump and recovery
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A Transition Economy
This is an economy which is changing from a centerally planned ecoomy to a free market
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Other cards in this set
Card 2
Front
Fixed Exchange Rate
Back
Where the Central Bank intervenes in the currency market so that the exchange rate stays close to the ER target ( in the EU this is between a 15% and -15% constraint band)
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