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Chapter 2 -- vocabulary

market capitalism -- an economic system in which individuals and firms allocate resources and production resources are privately owned. Consumers decide what goods they desire and firms determined what and how much to produce
Centrally planned socialism -- the state has broad powers to serve the public interest as it sees fit. State planners may decisions about what goods and services are produced and in what quantities; consumers spend their money on what is available. Government ownership of entire industries, as well as individual enterprises
centrally planned capitalism and economic system in which command resource allocation is utilized extensively in an environment of private resource ownership
market socialism -- Mark allocation policies are permitted within an overall environment of state ownership
G-7 -- Group of 7 -- high income countries, the United States, Japan, Germany, France, Britain, Canada, and Italy. Finance ministers, central bankers, and heads of state from the seven nations have worked together for a quarter of a century in an effort to steer the global economy in the direction of prosperity and to ensure monetary stability
Organization for Economic Cooperation and Development (OECD) -- institution comprised of high income countries, the 30 nations that belong to the OECD believe in market allocation economic systems and pluralistic democracy
The Triad -- Japan, Western Europe, and the United States. These three regions, represent the dominant economic centers of the world. Today, nearly 75% of the world income is located in the Triad
purchasing power parity (PPP) --Model of exchange rate determination stating that the price of a good in one country should equal the price of the same good in another country, exchanged at the current rate
economic exposure -- impact of currency fluctuations on the present by you of the companies expected future cash flows
transaction exposure -- arises when the companies activities result in sales or purchases denominated in foreign currencies
hedging --Reducing exposure to risk of loss resulting from fluctuations in exchange rates, commodity prices, interest rates etc
forward market -- a mechanism for buying and selling currencies and a preset price for future delivery