II. Give English equivalents of the following:

Hau,ionaribHa Banjora nonnr Ha iH03eMHy BanroTy

BapTicTb BantoTM HaflMJpHkfi nonm wa iH036MHy aantoTy

niflBHmeHHft BantoTHO- flecbiu,MT nnarijKHoro 6anaHcy

ro Kypcy jiiKBiflyBa™ KonweaHHa BamoTHoro rHyHKMii BanraTHMM Kypc «ypcy

III. Fill in the blanks with appropriate words:

t. 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 in ex­change rates is to ... their value.

narrowing foreign currency fix

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an increase cheaper gold standard

A. 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.

IV. 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 may desire. Thus an exchange rate is simply the price of one currency in terms of another.

We should recognize that the demand for foreign exchange is likely to have familiar downward slope, while the supply of foreign exchange will have the usual upward slope.

Exchange-rate changes have their own terminology. Depreciation of a currency refers to the fact that one currency has become cheaper in terms of another currency.

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. '

• Relative interest-rafe changes.

• Speculation.

All of these kinds of changes are taking place every minute of every day, thus keeping foreign-exchange markets active.

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

Significant changes occur in currency values, however, only when several of these forces move in the same direction at the same time.

One way to eliminate fluctuations in exchange rates is to fix their value. To fix exchange rates, each country may simply proclaim that its currency is «worfh» so much in relation to that of other countries. The easiest way to do this is for each country to define the worth of its currency in terms of some common standard. The standard that has been most popular is gold. Under a gold standard, each country determines that its currency is worth so much gold.

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In 1944 the value of the U.S. dollar was defined as being equal to 0.0294 ounces of gold, while the British pound was defined as being worth 0.0823 ounces of gold. This exchange rate between British pounds and U.S. dollars was fixed at 1 pound = $2.80.

The excess demand for pounds implies a balance-of-payments deficit for United States; more dollars are flowing out of the country than into it. A balance-of-payments deficit is an excess demand for foreign currency at current exchange rates. The same disequilibrium represents a balance-of-payments surplus for Britain, because its outward flow of pounds is less than its incoming flow. Balance-of-payments surplus is an excess demand for domestic currency at current exchange rates. With flexible exchange rates, the quantity of foreign exchange demanded always equals the quantiting supplied, and there is no imbalance.

Government may buy and sell foreign exchange for the purpose of narrowing rather than eliminating exchange-rate movements. Such limited intervention in foreign-exchange markets is referred to as managed exchange rates, or, more popularly «dirty floats».

V. 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.

1. What is the only way to eliminate fluctuations in exchange rate?

2. In what terms does each country define the worth of its currency?

5. What does the excess demand for any currency imply?

VI. Define the terms:

exchange rate demand for foreign exchange

depreciation supply of foreign exchange

gold reserves foreign-exchange markets

appreciation balance-of-payments deficit

gold standard balance-of-payments surplus

VII. Translate into English:

1. Sk6h JlnoHin Bwwna 3axoflis ao cTiiMyniOBaHHn BHyTpiuiHboT eKOHOMiKM, to cno>KMBaHi BwrpaHariM 6 weHwe rpoujefi Ha iMnopr, Kopnopau.fi* BKnaflann 6 KaniTan b anoHCbKi niflnpM-

192

eMCTBa, a He b aMepwtaHCbtci. 2. 3MeHiueHHJi nonnry Ha 1 ao-nap npMCKOpMTb nafliHHd fioro Kypcy nopiBHOHo 3 anoHCbKOto eHoto. 3. 3k pe3ynbTaT u,ihh Ha aMepvwaHCbKi TOBapw b 8noniT naflatoTb, a u,iwn Ha nnoncbKi TOBapn b AMepnuj 3pocTaK>Tb. 4. BantoTHMM «ypc — u,e ronoBHwi MexaHi3M nepepaxyHKy Bap-toctJ ofiHieY HaujoManbHo'i eantoiH biahocho ihluoT. 5. BantOTHiiw Kypc $1 = DM1,6 o3HaHae, mo 1 A°nap Kounye f ,6 Hiy*eu,bKnx MapoK i fioro Mowna Kynmw Ha pMHKy iH03eMHoT Ba/noTM 3a raKOK) ujhoK). 6. y 1987 pouj Cnony4eHi UJTaTM AMepHKM pa-30m 13 ronoBHMMH ToproBMMH napTHepaMM em-pain™ 6nn3bKO $100 MinbiioHiB, uj,o6 3ano6irin nafliHHto flonapa. 7. ripornroM ycboro uboro nepioay B*A6yBa(OTbcsi nocTiMHi AHCKycf' moflo «cnpaBWHbo'iB eapTOCTJ aonapa i lu,oao roro, nKa Kpa'iVta msc BWMBaTw aaxoftiB ana 3a6e3ne4eMHfi ujeT BapTocti. 8. 3mihm y Kypci Bantor He 3aB>«flw e 6awaHMM flenuteM. Bmpo6hmkm TOBapiB na eKcnopT He xorinn 6, m,o6 BapiicTb Baniorw 3pocTana (ninBMU^eHHfl BaprocTi); JMnoprepaM i TypncraM He noAo6ae-

TbCH, KOJ1M eapT*CTb BaniOTH 3HHJKyCTbCFl (nafliHHfl BapTOCTi).

VIII. Read and dramatize the following dialogue:

A.: The demand for foreign currency originates in many ways. First and foremost, 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.

6.; 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 on occasion, the recipients 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, Exxon produces and refines oil all over the world. 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.

6.: And whaf about investment opportunities? It's of common knowledge that foreign producers often make direct investments in the United States.

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A.: For instance Shell and BP gas stations are a familiar example of direct foreign investment, as are foreign auto plants such as 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.

B.; And sooner or later, the foreign firms will want to take some of their profits back to their own banks and stock-holders.

A.: Yes, in doing so, they create a demand for foreign currency as they convert the dollars they have earned in the United 5tates into the currencies their stockholders and creditors can spend at home.

.Ј)..■ foreigners have the same demand for U.S. dollars that we have for foreign currencies. In other words, demands for U.S. dollars represent a supply of foreign currencies. That is to say, foreigners offer to exchange (supply) foreign currency when they desire (demand) U.S. dollars.