KEY TERMS

currency union, p. 555 devaluation, p. 525 exchange rate, p. 521 fixed-exchange-rate system, p. 521 flexible-exchange-rate system, p. 521 floating-exchange-rate system, p. 521 foreign exchange market, p. 521 fundamental value of the exchange rate, p. 549

inconvertible currency, p. 550

J curve, p. 529

nominal appreciation, p. 524 nominal depreciation, p. 524 nominal exchange rate, p. 521

optimum currency area, p. 556 overvalued exchange rate, p. 550 purchasing power parity (PPP),

p. 525

real appreciation, p. 525

real depreciation, p. 525

real exchange rate, p. 523

relative purchasing power

parity, p. 528

revaluation, p. 525

speculative run, p. 550

terms of trade, p. 528

undervalued exchange rate, p. 551

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