金融考研复试专业英语（终极版）

金融考研复试专业英语（终极版） 专业英语汇总 1. How to define the aggregate price level? 如何衡量价格指数, Three measures of the aggregate price level are commonly encountered in economic data. (1)The first is the GDP deflator (GDP平减指数), which is defined as nominal GDP divided by real GDP. (2)Another popular measure of the aggregate price level is the Producer Price Index (生产者价格指数) which is a measure of the cost of a basket of goods and services bought by firms. (3) The measure of the aggregate price level that is most frequently reported in the press is the Consumer Price Index (消费者价格指数), which is measured by pricing a basket of goods and services bought by a typical urban household. 2. What’s the disadvantage and advantage of holding equity rather than debt? 持有股权的优劣, (1)The main disadvantage of owning a corporation’s equities rather than its debt is that an equity holder is a residual claimant (剩余求偿权), that is, the corporation must pay all its debt holders before it pays its equity holders . (2)The main advantage of holding equities is that equity holders benefit directly from any increases in the corporation’s profitability or asset value because equities confer ownership rights on the equity holders. Debt holders do not share in this benefit, because their payments are fixed. 3. What’s the difference between primary and secondary market? 一级市场与二级市场的区别, (1)A primary market is a financial market in which new issues of a security, such as a bond or a stock, are sold to initial buyers by the corporation or government agency borrowing the funds. (2)A secondary market is a financial market in which securities that have been previously issued can be resold. 4. What’s the difference between foreign bond and Eurobond? 外国债券和欧洲债券的区别, (1)Foreign bonds are sold in a foreign country and are denominated in that country’s currency. For example, a bond issued by a Chinese company denominated in U.S. dollars sold in New York. (2)Eurobond is a bond denominated in a currency other than that of the country in which it is sold. For example, a bond denominated in U.S. dollars sold in China. 5. What’s asset transformation and diversification,资产转换和分散化 (1)Financial intermediaries create and sell assets with risk characteristics that people are comfortable with, and the intermediaries then use the funds they acquire by selling these assets to purchase other assets that may have far more risk. This process of risk sharing is referred as asset transformation, because in a sense, risky assets are turned into safer assets for investors. (2)Diversification entails investing in a portfolio of assets whose returns do not always move together with the result that overall risk is lower than for individual assets. It also refers to “You shouldn't put all your eggs in one basket”. Diversification can eliminate firm-specific risk—the uncertainty associated with the specific companies. But diversification cannot eliminate market risk—the uncertainty associated with the entire economy, which affects all companies traded on the stock market. For example, when the economy goes into a recession, most companies experience falling sales, profit and low stock returns. Diversification reduces the risk of holding stocks, but it does not eliminate it. 6. Explain the following concepts: asymmetric information, adverse selection and moral hazard. (1)Asymmetric information (信息不对称) refers to that one party often does not know enough about the other party to make accurate decisions. For example, a borrower who takes out a loan usually has better information about the potential returns and risk associated with the investment projects for which the funds are invested than the lender does. - 1 - (2)Adverse selection (逆向选择) is the problem created by asymmetric information before the transaction occurs. Adverse selection in financial markets occurs when the potential borrowers who are the most likely to default are the ones who most actively seek out a loan and are thus most likely to be selected. (3)Moral hazard (道德风险) is the problem created by asymmetric information after the transaction occurs. Moral hazard in financial markets is the risk that the borrower might engage in activities that are undesirable from the lenders point of view, because they make it less likely that the loan will be paid back. 7. What’s the function of money? 货币的职能, Money has three primary functions in any economy: as a medium of exchange, as a unit of account, and as a store of value. (1)When money is used to pay for goods and services, it plays the role of a medium of exchange (流通手段). The use of money as a medium of exchange promotes economic efficiency by minimizing the time spent in exchanging goods and services. (2)The second role of money is to provide a unit of account (价值尺度), that is, it is used to measure value of goods and services in the economy. (3)Money also functions as a store of value (储藏手段). A store of value is used to save purchasing power from the time income is received until the time it is spent. This function of money is useful, because most of us do not want to spend our income immediately upon receiving it, but rather prefer to wait until we have the time or the desire to shop. 8. What’s the Fisher equation and Fisher effect? 费雪等式与费雪效应, (1)The Fisher equation states that the nominal interest rate equals the real interest rate plus the expected rate of inflation. The equation tells us that all else equal, a rise in a country’s expected inflation rate will eventually cause an equal rise in the nominal interest rate. Similarly, a fall in the expected inflation rate will eventually cause a fall in the nominal interest rate. (2)This long-run relationship between inflation and interest rates is called the Fisher effect. The Fisher effect implies, for example, that if U.S. inflation were to rise permanently from a constant level of 5 percent per year to a constant level of 10 percent per year, dollar interest rates would eventually catch up with the higher inflation, rising by 5 percentage points per year from their initial level. These changes would leave the real rate of return on dollar assets unchanged. The Fisher effect is therefore another example of the general idea that in the long run, purely monetary developments should have no effect on an economy’s real variables. 9. How to explain the negative relation between the quantity of money demanded and the interest rate? We can explain that the quantity of money demanded and the interest rate should be negatively related by using the concept of opportunity cost (机会成本), the amount of revenue sacrificed by taking one course of action rather than another. As the interest rate on bonds rises, the opportunity cost of holding money rises, thus money is less desirable and the quantity of money demanded must fall. 10. Risk Premium 风险溢价 The spread between the interest rates on bonds with default risk and default-free bonds, both of the same maturity, called the risk premium, indicates how much additional interest people must earn to be willing to hold that risky bond. 11. Briefly introduce expectations theory, segmented markets theory and liquidity premium theory. (1)The expectations theory (预期假说) of the term structure states the following proposition: the interest rate on a long-term bond will equal an average of the short-term interest rates that people expect to occur over the life of the long-term bond. (2)The segmented markets theory (市场分割假说) of the term structure sees markets for different-maturity - 2 - bonds as completely separate and segmented. The interest rate for each bond with a different maturity is then determined by the supply of and demand for that bond, with no effects from expected returns on other bonds with other maturities. (3)The liquidity premium theory (流动性溢价假说) of the term structure states that the interest rate on a long-term bond will equal an average of short-term interest rates expected to occur over the life of the long-term bond plus a liquidity premium. It is also called preferred habitat theory (偏好停留假说). 12. What’s the difference between adaptive expectation and rational expectation? (1)Adaptive expectation (适应性预期) states that expectations form from past experience only and changes in expectations will occur slowly over time as past data change. For example, expectations of inflation is typically viewed as being an average of past inflation rates. So if inflation had formerly been steady at a 5% rate, expectations of future inflation would also be 5% . (2)Rational expectation (理性预期) can be stated as follows: expectations will be identical to optimal forecasts (the best guess of the future) using all available information. 13. Efficient Market Hypothesis 有效市场假说 In finance, the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient". In consequence of this, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made. There are three major versions of the hypothesis: "weak", "semi-strong", and "strong". The weak-form EMH claims that prices on traded assets (e.g., stocks, bonds, or property) already reflect all past publicly available information. The semi-strong-form EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect new public information. The strong-form EMH additionally claims that prices instantly reflect even hidden or "insider" information. Critics have blamed the belief in rational markets for much of the late-2000s financial crisis.[1][2][3] In response, proponents of the hypothesis have stated that market efficiency does not mean having no uncertainty about the future, that market efficiency is a simplification of the world which may not always hold true, and that the market is practically efficient for investment purposes for most individuals.[4] 14. “Lemons Problem” 次品问 A particular aspect of the way the adverse selection problem interferes with the efficient functioning of a market is called “lemons problem”. We can use the used-car market to illustrate this concept. Potential buyers of used cars are frequently unable to assess the quality of the car, that is, they can’t tell whether a particular used car is a good car or a lemon (次品). The price that a buyer pays must therefore reflect the average quality of the cars in the market, somewhere between the low value of a lemon and the high value of a good car. The owner of a used car, by contrast, is more likely to know whether the car is a good car or a lemon. If the car is a lemon, the owner is more than happy to sell it at the price the buyer is willing to pay, which, being somewhere between the value of a lemon and a good car, is greater than the lemons value. However, if the car is a good car, the owner knows that the car is undervalued at the price the buyer is willing to pay, and so the owner may not want to sell it. As a result of this adverse selection, few good used cars will come to the market. Because the average quality of a used car available in the market will be low and because few people want to buy a lemon, there will be few sales. The used-car market will function poorly or even disappear. 15. Principal-agent Problem 委托-代理问题 Principal-agent problem refers to that the managers in control (the agents) may act in their own interest rather than in the interest of the stockholder (the principals) because the managers have less incentive to maximize profits than the stockholder do. The principal-agent problem, which is an example of moral hazard, arises only - 3 - because a manager has more information about his activities than the stockholder does. So, there is asymmetric information. 16. What’s “irrational exuberance” proposed by Alan Greenspan? 非理性繁荣 Irrational exuberance refers to a phenomenon that asset prices, in the stock market and real estate, are driven well above their fundamental economic values by investor psychology. The result is an asset-price bubble (资 产价格泡沫), such as the tech stock market bubble of the late 1990s or the recent housing price bubble in subprime crisis. 17. How to solve asymmetric information problems? 如何解决信息不对称的问题, 18. Securitization and Subprime mortgage 资产证券化与次级抵押贷款 (1)Subprime mortgages are mortgages for borrowers with less-than-stellar credit records. (2)Securitization is the process of transforming otherwise illiquid financial assets (such as residential mortgages, auto loans, and credit card receivables), which have typically been the main business of banking institutions, into marketable capital market securities. 19. What’s time-inconsistency problem? 时间不一致问题 The time -inconsistency problem is some thing we deal with continually in everyday life. We often have a plan that we know will produce a good outcome in the long run, but when tomorrow comes, we just can't help ourselves and we deny our plan because doing so has short-run gains. In other words, we find ourselves unable to consistently follow a good plan over time, and the good plan is said to be time-inconsistent and will soon be abandoned . 20. Political Business Cycle 政治经济周期 Political business cycle is a process that can be illustrated in the following example. Just before an election, expansionary policies are pursued to lower unemployment and interest rates. After the election, the bad effects of these policies, that is high inflation and high interest rates, come home to roost, requiring contractionary policies that politicians hope the public will forget before the next election. 21. What’s money multiplier and what are the factors that affect it? 货币乘数及其影响因素, (1)The money multiplier, denoted by m, tells us how much the money supply changes for a given change in the monetary base. The relationship between the money supply, the money multiplier and the monetary base is - 4 - described by the following equation: M = m × MB (2)The money multiplier is a function of the currency ratio set by depositor c, the excess reserves ratio set by banks e, and the required reserve ratio set by the Fed r. The money multiplier m is thus 22. What are the tools of monetary policy? 货币政策工具 There are three tools of monetary policy that can be conducted by the central bank, such as open market operations, discount lending and reserve requirements. (1)Open market operations (公开市场操作) are the most important monetary policy tool, because they are the primary determinants of changes in interest rates and the monetary base, the main source of fluctuations in the money supply. Open market purchases expand reserves and the monetary base, thereby increasing the money supply and lowering short-term interest rates. Open market sales shrink reserves and the monetary base, decreasing the money supply and raising short-term interest rates. Open market operations have four advantages over the other tools of monetary policy: ?Open market operations occur at the initiative of the Fed, which has complete control over their volume. ?Open market operations are flexible and precise, and they can be used to any extent. ?Open market operations are easily reversed.?Open market operations can be implemented quickly, since they involve no administrative delays. (2)The facility at which banks can borrow reserves from the Fed is called the discount window (贴现窗口). The facility is intended to be a backup source of liquidity for banks during financial crisis. The most important advantage of discount policy is that the Fed can use it to perform its role of lender of last resort (最后贷款人). The disadvantage of discount policy is that the decisions to take out discount loans are made by banks and are therefore not completely controlled by the Fed. (3)Changes in reserve requirements (法定存款准备金) affect the money supply by causing the money supply multiplier to change. A rise in reserve requirements reduces the amount of deposits that can be supported by a given level of the monetary base and will lead to a contraction of the money supply. A rise in reserve requirements also increases the demand for reserves and raises the federal funds rate. Conversely, a decline in reserve requirements leads to an expansion of the money supply and a fall in the federal funds rate. Reserve requirements have at least three disadvantages: ?Owing to financial innovation, reserve requirements are no longer binding for most banks, so this tool is much less effective than it once was. ? Raising the requirements can cause immediate liquidity problems for banks where reserve requirements are binding. ?Continually fluctuating reserve requirements would also create more uncertainty for banks and make their liquidity management more difficult. 23. Law of One Price and Theory of Purchasing Power Parity一价定理与购买力评价理论 (1)The law of one price states that if two countries produce an identical good, and transportation costs and trade barriers are very low, the price of the good should be the same throughout the world no matter which country produces it. (2)The theory of purchasing power parity (PPP) states that exchange rates between any two currencies will adjust to reflect changes in the price levels of the two countries. The theory of PPP is simply an application of the law of one price to national price levels rather than to individual prices. The statement that exchange rates equal relative price levels is sometimes referred to as absolute PPP (绝对购买力平价). Relative PPP (相对购 买力平价) states that the percentage change in the exchange rate between two currencies over any period equals the difference between the percentage changes in national price levels. 24. Real Exchange Rate 实际汇率 The real exchange rate refers to the rate at which domestic goods can be exchanged for foreign goods. In effect, it is the price of domestic goods relative to the price of foreign goods denominated in the domestic - 5 - currency. For example, if a basket of goods in New York costs $50, while the cost of the same basket of goods in Tokyo costs $75 because it costs 7500 yen while the exchange rate is at 100 yen per dollar, then the real exchange rate is 0.66 (=$50/$75). The real exchange rate is below l, indicating that it is cheaper to buy the basket of goods in the United States than in Japan. 25. Why the theory of purchasing power parity cannot fully explain exchange rates? 购买力平价的缺陷 (1)Contrary to the assumption of the law of one price, transport costs and restrictions on trade certainly do exist. These trade barriers may be high enough to prevent some goods from being traded between countries. (2)Monopolistic practices in goods markets may interact with transport costs and other trade barriers to weaken further the link between the prices of similar goods sold in different countries. (3)Because the inflation data reported in different countries are based on different commodity baskets, there is no reason for exchange rate changes to offset official measures of inflation differences, even when there are no barriers to trade and all products are tradable. 26. Monetary Neutrality 货币中性 Monetary neutrality states that in the long run, a one-time percentage rise in the money supply is matched by the same one-time percentage rise in the price level, leaving unchanged the real money supply and all other real variables such as real interest rates. 27. Exchange Rate Overshooting 汇率超调 The phenomenon that the exchange rate falls by more in the short run than it does in the long run when the money supply increases is called exchange rate overshooting. It can help explain why exchange rates exhibit so much volatility. Exchange rate overshooting is a direct consequence of the short-run rigidity of the price level. In a hypothetical world where the price level could adjust immediately to its new, long-run level after a money supply increase, the interest rate would not fall because prices would adjust immediately and prevent the real money supply from rising. Thus, the exchange rate would maintain equilibrium simply by jumping to its new, long-run level right away. 28. Interest Parity Condition 利率平价条件 (1)The uncovered interest parity condition (非抛补利率平价) states that the domestic interest rate equals the foreign interest rate minus the expected appreciation of the domestic currency, or equivalently, the domestic interest rate equals the foreign interest rate plus the expected appreciation of the foreign currency. If the domestic interest rate is higher than the foreign interest rate, there is a positive expected appreciation of the foreign currency, which compensates for the lower foreign interest rate. This condition can be rewritten as (2) The covered interest parity condition (抛补利率平价) states that the rates of return on dollar deposits and “covered” foreign deposits must be the same. Suppose you want to buy a euro deposit with dollars but would like to be certain about the number of dollars it will be worth at the end of a year. You can avoid exchange rate risk by buying a euro deposit and, at the same time, selling the proceeds of your investment forward. We say you have “covered” yourself, that is, avoided the possibility of an unexpected depreciation of the euro. 29. Unsterilized Foreign Exchange Intervention and Sterilized Foreign Exchange Intervention (1)A foreign exchange intervention in which a central bank allows the purchase or sale of domestic currency to have an effect on the monetary base, is called an unsterilized foreign exchange intervention (非冲销式干预). An unsterilized intervention in which domestic currency is sold to purchase foreign assets leads to a gain in international reserves, an increase in the money supply, and a depreciation of the domestic currency. An - 6 - unsterilized intervention in which domestic currency is purchased by selling foreign assets leads to a drop in international reserves, a decrease in the money supply, and an appreciation of the domestic currency. (2)A foreign exchange intervention with an offsetting open market operation that leaves the monetary base unchanged is called a sterilized foreign exchange intervention (冲销式干预). A sterilized intervention leaves the money supply unchanged and so has no direct way of affecting interest rates or the expected future exchange rate. 30. Fixed Exchange Rate Regime, Floating Exchange Rate Regime and Managed Float Regime (1)In a fixed exchange rate regime (固定汇率制), the value of a currency is pegged relative to the value of one other currency, which is called the anchor currency (锚货币), so that the exchange rate is fixed in terms of the anchor currency. (2)In a floating exchange rate regime (浮动汇率制), the value of a currency is allowed to fluctuate against all other currencies. (3)When countries intervene in foreign exchange markets in an attempt to influence their exchange rates by buying and selling foreign assets, the regime is referred to as a managed floating regime (管理浮动汇率制) or a dirty floating (肮脏浮动). 31. What are the advantages and disadvantages of Gold Standard? 金本位的利与弊, (1)Before World War I, the world economy operated under the gold standard, a fixed exchange rate regime in which the currency of most countries was convertible directly into gold at fixed rates, so exchange rates between currencies were also fixed. (2)The fixed exchange rates under the gold standard had the important advantage of encouraging world trade by eliminating the uncertainty that occurs when exchange rates fluctuate. (3)There are disadvantages of gold standard as follows: ?Adherence to the gold standard meant that a country had no control over its monetary policy, because its money supply was determined by gold flows between countries. ?Monetary policy throughout the world was greatly influenced by the production of gold and gold discoveries. 32. Currency Board and Dollarization 货币局与美元化 (1)Currency board (货币局制度) means that the domestic currency is backed 100% by a foreign currency and in which the note-issuing authority, whether the central bank or the government, establishes a fixed exchange rate to this foreign currency and stands ready to exchange domestic currency for the foreign currency at this rate whenever the public requests it. A currency board is just a variant of a fixed exchange-rate target in which the commitment to the fixed exchange rate is especially strong because the conduct of monetary policy is in effect put on autopilot, and taken completely out of the hands of the central bank and the government. (2)Dollarization (美元化) means the adoption of a sound currency, like the U.S. dollar, as a country’s money. Indeed, dollarization is just another variant of a fixed exchange-rate target with an even stronger commitment mechanism than a currency board provides. The common disadvantage of both regimes is that a country that ties its exchange rate to an anchor currency of a larger country loses control of its monetary policy. 33. Quantity Theory of Money 货币数量论 The quantity theory of money states that nominal income is determined solely by movements in the quantity of money. We can derive the conclusion from the equation of exchange (交易方程式): MV=PY. Since the institutional and technological features of the economy would affect velocity of money (货币流通速 度) only slowly over time, so velocity V would normally be reasonably constant in the short run. Because the classical economists thought that wages and prices were completely flexible, they believed that the level of aggregate output Y produced in the economy during normal times would remain at the full-employment level, so Y in the equation of exchange could also be treated as reasonably constant in the short run. - 7 - So, for the classical economists, the quantity theory of money provided an explanation of movements in the price level: movements in the price level result solely from changes in the quantity of money. 34. Liquidity Preference Theory 流动性偏好理论 The liquidity preference theory of John Maynard Keynes pointed out that there are three motives behind the demand for money: the transactions motive, the precautionary motive, and the speculative motive. The demand of money for transaction and precautionary motives is proportional to income, while the demand of money for speculative motive is negatively related to the level of interest rate. So the demand for real money balances is a function of interest rate and income as follow 35. Friedman’s Modern Quantity Theory of Money 弗里德曼的现代货币数量论 Friedman stated that the demand for money should be a function of the resources available to individuals (their wealth) and the expected returns on other assets relative to the expected return on money. From this reasoning, Friedman expressed his formulation of the demand for money as follows: Unlike Keynes’s theory, which indicates that interest rates are an important determinant of the demand for money, Friedman's theory suggests that changes in interest rates should have little effect on the demand for money. 36. Crowding Out Effect of Fiscal Policy 财政政策的挤出效应 Expansionary fiscal policy will crowd out investment and net exports, which decrease because of the rise in the interest rate. This situation is called crowding out (挤出效应). When the demand for money is unaffected by the interest rate, the LM curve is vertical. An expansionary fiscal policy does not lead to a rise in output but a sharp in interest rate, which means the increased government spending have completely crowed out investment and net exports. This situation is called complete crowding out (完全挤出). 37. Transmission Mechanisms of Monetary Policy 货币政策传导机制 (1)Traditional Interest-Rate Channel 利率机制 An expansionary monetary policy leads to a fall in real interest rates, which in turn lowers the cost of capital, causing a rise in investment spending, thereby leading to an increase in aggregate demand and a rise in output. (2)Exchange Rate Channel 汇率机制 An expansionary monetary policy leads to a fall in real interest rates, which in turn the currency depreciates, causing a rise in net exports, thereby leading to an increase in aggregate demand and a rise in output. (3)Tobin’s q Theory 托宾q理论 - 8 - Tobin defines q as the market value of firms divided by the replacement cost of capital. If q is high, the market price of firms is high relative to the replacement cost of capital, and new plant and equipment capital is cheap relative to the market value of firms. Investment spending will rise, because firms can buy a lot of new investment goods with only a small issue of stock. Conversely, when q is low, firms will not purchase new investment goods because the market value of firms is low relative to the cost of capital. Investment spending, the purchase of new investment goods, will then be very low (4)Wealth Effects 财富效应 (5)Bank Lending Channel 银行贷款渠道 (6)Balance Sheet Channel 资产负债渠道 38. Cost-Push Inflation and Demand-Pull Inflation 成本推动通货膨胀与需求拉动通货膨胀 (1)Cost-push inflation occurs because of negative supply shocks or a push by workers to get higher wages. Persistent cost-push inflation is a monetary phenomenon because it cannot occur without the monetary authorities pursuing an accommodating policy of a higher rate of money growth. (2)Demand-pull inflation results when policymakers pursue policies that shift the aggregate demand curve to the right. If policymakers set a target for unemployment that is too low because it is less than the natural rate of unemployment, this can set the stage for a higher rate of money growth and a resulting persistent inflation. 40. Ricardian Equivalence 李嘉图等价 Ricardian equivalence states that when the government runs deficits and issues bonds, the public recognizes that it will be subject to higher taxes in the future to pay off these bonds. The public then saves more in anticipation of these future taxes, with the net result that the public demand for bonds increases to match the increased supply. It implies that expansionary fiscal policy which causes budget deficits and bonds issuance will have no effect on the aggregate demand and the output. 41. Lucas Critique 卢卡斯批判 According to the principle of rational expectations theory, the way in which expectations are formed changes when the behavior of forecasted variables changes. So when policy changes, the relationship between expectations and past information will change, and because expectations affect economic behavior, the relationships in the econometric model will change. The econometric model, which has been estimated with past data, is then no longer the correct model for evaluating the response to this policy change and may consequently prove highly misleading. This proposition is called Lucas critique. The Lucas critique points out not only those conventional econometric models cannot be used for policy evaluation, but also that the public's expectations about a policy will influence the response to that policy. 42. What’s the difference between Microeconomics and Macroeconomics? 微观与宏观的区别 (1)Microeconomics is the study of how households and firms make decisions and how they interact in specific markets. A micro-economist might study the effects of rent control on housing in New York City, the impact of foreign competition on the U.S. auto industry, or the effects of school attendance on workers’ earnings. (2)Macroeconomics is the study of economy-wide phenomena, including inflation, unemployment, and economic growth. A macroeconomist might study the effects of borrowing by the federal government, the changes over time in the economy’s rate of unemployment, or alternative policies to promote growth in national - 9 - living standards. 43. What’s financial derivatives and give some examples? 金融衍生品 (1)Financial derivatives (金融衍生品) are a class of assets that are more complicated than ordinary stocks and bonds, but have values that can depend on stock and bond values. (2)A foreign exchange swap (外汇掉期) is a spot sale of a currency combined with a forward repurchase of that currency. For example, suppose the Toyota auto company has just received $1 million from American sales and knows it will have to pay those dollars to a California supplier in three months. Toyota would meanwhile like to invest the $1 million in euro bonds. A three-month swap of dollars into euros may result in lower brokers’ fees than the two separate transactions of selling dollars for spot euros and selling the euros for dollars on the forward market. (3)When you buy a foreign exchange futures contract (外汇期货) or forward contract (外汇远期), you buy a promise that a specified amount of foreign currency will be delivered on a specified date in the future. (4)A foreign exchange option (外汇期权) gives its owner the right to buy or sell a specified amount of foreign currency at a specified price at any time up to a specified expiration date. The other party to the deal, the option’s seller, is required to sell or buy the foreign currency at the discretion of the option’s owner, who is under no obligation to exercise his right. 44. Carry Trade 套利交易 More generally, international investors frequently borrow low-interest currencies (called “funding” currencies) and buy high-interest currencies (called “investment” currencies), with results that can be profitable over long periods. This activity is called the carry trade. 45. Hyperinflation 恶性通货膨胀 Hyperinflation is an explosive and seemingly uncontrollable inflation in which money loses value rapidly and may even go out of use. The line between inflation and hyperinflation is at an inflation rate of 50 percent per month, which, through the power of compounding, comes out to 12,875 percent per year. 46. What’s the relationship between the Marshall-Lerner condition and the J-Curve? (1)The Marshall-Lerner condition states that all else equal a real depreciation improves the current account if the sum of the relative price elasticity of export and import demand exceeds 1, that is (2)A country’s current account even worsens immediately after depreciation and begins to improve only some months later. If the current account initially worsens after depreciation, its time path has an initial segment reminiscent of a J and therefore is called the J-curve. (3)For most countries, the sum of the relative price elasticity of export and import demand is less than 1. Since the impact elasticity usually fail to satisfy the Marshall-Lerner condition, the estimates support the existence of an initial J-curve effect that causes the current account to deteriorate immediately following a real depreciation. It is also true, however, that most countries satisfy the Marshall-Lerner condition in the long run. In the long run, a real depreciation is likely to improve the current account, while a real appreciation is likely to worsen it. 47. Do you agree with that monetary policy is no longer effective in the situation of liquidity trap? (1)According to the theory of liquidity preference, expansionary monetary policy works by reducing interest rates and stimulating investment spending. But if interest rates have already fallen almost to zero, then perhaps monetary policy is no longer effective. Nominal interest rates cannot fall below zero, because rather than making a loan at a negative nominal interest rate, a person would just hold cash. In this environment, expansionary monetary policy might not have any effect. Aggregate demand, production and employment may - 10 - be “trapped” at low levels. This situation is called liquidity trap (流动性陷阱). (2)The central bank can continue to have tools to expand the economy, even after its interest rate target hits its lower bound of zero. The central bank could raise inflation expectations by committing itself to future monetary expansion. Even if nominal interest rates cannot fall any further, higher expected inflation can lower real interest rates by making them negative, which would stimulate investment spending. 48. Exchange Rate Union 汇率联盟 Exchange rate union is an organization whose members agree to fix their mutual exchange rates while allowing their currencies to fluctuate in value against the currencies of nonmember countries, such as the European Monetary System’s Exchange Rate Mechanism. In the exchange rate mechanism (ERM), the exchange rate between any pair of currencies of the participating countries was not supposed to fluctuate outside narrow limits, called the “snake” (蛇形浮动). In practice, all of the countries in the EMS pegged their currencies to the German mark. 49. Balance of Payments Crisis and Capital Flight 国际收支危机与资本外逃 (1)In a country with fixed exchange rate regime, the central bank may find it infeasible to maintain the current fixed exchange rate. For example, the central bank may be running short on foreign reserves, or it may face high domestic unemployment. Because market participants know the central bank may respond to such situations by devaluing the currency, it would be unreasonable for them to expect the current exchange rate to be maintained forever. The market’s belief in an upcoming change in the exchange rate gives rise to a balance of payments crisis (国际收支危机), which is a sharp change in official foreign reserves sparked by a change in expectations about the future exchange rate. (2)A large and sudden movement of funds out of a country accompanying a devaluation scare is called capital flight (资本外逃). Residents flee the domestic currency by selling it to the central bank for foreign exchange, and they then invest the foreign currency abroad. At the same time, foreigners convert holdings of home assets into their own currencies. By pushing reserves even lower, capital flight may force the central bank to devalue sooner and by a larger amount than planned 50. The signaling effect of sterilized foreign exchange intervention 冲销式干预的信号效应 If market participants are unsure about the future direction of macroeconomic policies, sterilized intervention may give an indication of where the central bank expects the exchange rate to move. This signaling effect of sterilized foreign exchange intervention can alter the market’s view of future monetary or fiscal policies and cause an immediate exchange rate change. For example, a sterilized purchase of foreign assets may convince the market that the central bank intends to make a home currency depreciate. 51. The Bimetallic Standard and the Gold Exchange Standard 双币本位制与金汇兑本位制 (1)Bimetallic standard (双币本位制) was a regime in which the currency was based on both silver and gold. In a bimetallic system, gold would tend to go out of monetary circulation when its relative market price rose above the mint parity (铸币平价), and silver coin would become the predominant form of money. This phenomenon that bad money drives out good is called Gresham’s law (格雷欣法则). (2)Under a gold exchange standard (金汇兑本位制), central banks’ reserves consist of gold and currencies whose prices in terms of gold are fixed, and each central bank fixes its exchange rate to a currency with a fixed gold price. The most classic example is Bretton Woods System. 52. Internal Balance and External Balance 内部均衡与外部均衡 Internal balance (内部均衡) requires the full employment of a country’s resources and domestic price level stability. External balance (外部均衡) is attained when a country’s balance of payments - 11 - account is neither so in deficit nor in surplus. 53. Impossible Trilemma 三元悖论 Policy makers in an open economy face an impossible trilemma in choosing the monetary arrangements that best enable them to attain their internal and external balance goals. The impossible trilemma illustrates the impossibility of a country’s having more than two items from the following list: ?exchange rate stability, ? monetary policy autonomy, ?freedom of international capital movements. 54. Triffin Dilemma 特里芬两难 Triffin realized that as central banks’ international reserve needs grew over time, their holdings of dollars would necessarily grow until they exceeded the U.S. gold stock. Since the United States had promised to redeem these dollars at $35 an ounce, it would no longer have the ability to meet its obligations when all dollar holders simultaneously try to convert their dollars into gold. This would lead to a confidence problem (信心问题): Central banks, knowing that their dollars were no longer “as good as gold,” might become unwilling to accumulate more dollars and might even bring down the system by attempting to cash in the dollars they already held. 56. What is an optimum currency area? 最优通货区 Optimum currency areas are groups of regions with economies closely linked by trade in goods and services and by factor mobility. A fixed exchange rate area will best serve the economic interests of each of its members if the degree of output and factor trade among the included economies is high. 57. What’s information asymmetry and what effects it will cause? (1)A difference in access to relevant knowledge is called an information asymmetry (信息不对称). A worker knows more than his employer about how much effort he puts into his job. A seller of a used car knows more than the buyer about the car’s condition. (2)Moral hazard (道德风险) is a problem that arises when one person, called the agent, is performing some task on behalf of another person, called the principal. If the principal cannot perfectly monitor the agent’s behavior, the agent tends to undertake less effort than the principal considers desirable. (3)Adverse selection (逆向选择) is a problem that arises in markets in which the seller knows more about the attributes of the good being sold than the buyer does. In such a situation, the buyer runs the risk of being sold a good of low quality. That is, the “selection” of goods sold may be “adverse” from the standpoint of the uninformed buyer. 58. How to solve the problems caused by information asymmetry? (1)Markets respond to problems of asymmetric information in many ways. One of them is signaling (信号发 送), which refers to actions taken by an informed party for the purpose of credibly revealing his private information. For example, firms may spend money on advertising to signal to potential customers that they have high-quality products. (2)When an uninformed party takes actions to induce the informed party to reveal private information, the phenomenon is called screening (信号甄别). For example, a person buying a used car may ask that it be checked by an auto mechanic before the sale. A seller who refuses this request reveals his private information that the car is a lemon. The buyer may decide to offer a lower price or to look for another car. 59. Arrow’s Impossibility Theorem (阿罗不可能定理) Assumes that society wants a voting system to choose among these outcomes that satisfies several properties: • Unanimity (一致性): If everyone prefers A to B, then A should beat B. • Transitivity (传递性): If A beats B, and B beats C, then A should beat C. - 12 - • Independence of irrelevant alternatives (独立性): The ranking between any two outcomes A and B should not depend on whether some third outcome C is also available. • No dictators (非独裁): There is no person who always gets his way, regardless of everyone else’s preferences. Arrow proved, mathematically and incontrovertibly, that no voting system can satisfy all these properties. This amazing result is called Arrow’s impossibility theorem. 60. Automatic Stabilizers (自动稳定器) (1)Automatic stabilizers are changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action. The most important automatic stabilizer is the tax system. Because incomes, earnings, and profits all fall in a recession, the government’s tax revenue falls as well. This automatic tax cut stimulates aggregate demand and, thereby, reduces the magnitude of economic fluctuations. (2)Government spending also acts as an automatic stabilizer. In particular, when the economy goes into a recession and workers are laid off, more people apply for unemployment insurance benefits, welfare benefits, and other forms of income support. This automatic increase in government spending stimulates aggregate demand at exactly the time when aggregate demand is insufficient to maintain full employment. 61. Diminishing Returns and diminishing marginal product 收益递减与边际产品递减 (1)As the stock of capital rises, the extra output produced from an additional unit of capital falls. In other words, when workers already have a large quantity of capital to use in producing goods and services, giving them an additional unit of capital increases their productivity only slightly. This property is called diminishing returns. (2)The marginal product of any input in the production process is the increase in the quantity of output obtained from one additional unit of that input. As the number of input increases, the marginal product declines. This property is called diminishing marginal product. 62. The Free-Rider Problem 免费搭车者问题 A free rider is a person who receives the benefit of a good but does not pay for it. Because public goods are not excludable, the free-rider problem prevents the private market from supplying them. The government, however, can potentially remedy the problem. If the government decides that the total benefits of a public good exceed its costs, it can provide the public good, pay for it with tax revenue, and make everyone better off. 63. Tragedy of the Commons 公共地悲剧 (1)Common resources, like public goods, are not excludable: They are available free of charge to anyone who wants to use them. Common resources are, however, rival in consumption: One person’s use of the common resource reduces other people’s ability to use it. Thus, common resources give rise to a new problem called the Tragedy of the Commons. (2)The Tragedy of the Commons illustrates why common resources are used more than is desirable from the standpoint of society as a whole. When one person uses a common resource, he or she diminishes other people’s enjoyment of it. Because of this negative externality, common resources tend to be used excessively. The government can solve the problem by using regulation or taxes to reduce consumption of the common resource. Alternatively, the government can sometimes turn the common resource into a private good. 64. Excludability and Rivalry in consumption 排他性与竞争性 Excludability (排他性) is the property of a good whereby a person can be prevented from using it. Rivalry in consumption (竞争性) is the property of a good whereby one person’s use diminishes other people’s use. According to the two properties of a good, we can categorized goods into four groups: - 13 - (1)Private goods (私有物品)are both excludable and rival in consumption. (2)Public goods (公共物品) are neither excludable nor rival in consumption. (3)Common resources (公共资源) are rival in consumption but not excludable. (4)Club goods (俱乐部物品) are excludable but not rival in consumption. 65. Externality 外部性 (1)An externality arises when a person engages in an activity that influences the well-being of a bystander but neither pays nor receives any compensation for that effect. If the impact on the bystander is adverse, it is called a negative externality (负外部性). If it is beneficial, it is called a positive externality (正外部性). (2)In the presence of a negative externality, such as pollution, the social cost of the good exceeds the private cost. The optimal quantity is therefore smaller than the equilibrium quantity. In the presence of a positive externality, the social value of the good exceeds the private value. The optimal quantity is therefore larger than the equilibrium quantity. 66. Public Policies toward Externality 治理外部性的政策 (1)Regulation (管制): the government can remedy an externality by making certain behaviors either required or forbidden. (2)Corrective Taxes and Subsidies (税收或补贴): the government can internalize the externality by taxing activities that have negative externalities and subsidizing activities that have positive externalities. Corrective tax is a tax designed to induce private decision makers to take account of the social costs that arise from a negative externality (3)Tradable Pollution Permits (可交易的污染许可证): Those firms that can reduce pollution at a low cost will sell whatever permits they get, and firms that can reduce pollution only at a high cost will buy whatever permits they need. As long as there is a free market for the pollution rights, the final allocation will be efficient regardless of the initial allocation. (4)Coase Theorem (科斯定理): if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own. 67. Distinction among normal good, inferior good and giffen good,substitute and complement, (1)Normal good (正常品) is a good for which, other things equal, an increase in income leads to an increase in demand. (2)Inferior good (劣等品) is a good for which, other things equal, an increase in income leads to a decrease in demand. (3)Giffen goods (吉芬商品) are inferior goods for which the income effect (收入效应) exceeds the substitution effect (替代效应). Therefore, an increase in the price of giffen good raises the quantity demanded. (4)Substitutes (替代品) are two goods for which an increase in the price of one leads to an increase in the demand for the other. Perfect substitutes (完全替代品) are two goods with straight line indifference curves. (5)Complements (互补品) are two goods for which an increase in the price of one leads to a decrease in the demand for the other. Perfect complements (完全互补品) are two goods with right angle indifference curves. 68. Consumer surplus and Producer surplus (1)Consumer surplus (消费者剩余) is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. Consumer surplus measures the benefit buyers receive from participating in a market. For example, a consumer receives a $20 benefit from participating in the market because he pays only $80 for a good which values at $100. (2)Producer surplus (生产者剩余) is the amount a seller is paid minus the cost of production. Producer surplus measures the benefit sellers receive from participating in a market. - 14 - 69. Multiplier Effect and Crowding-out Effect 乘数效应与挤出效应 (1)Each dollar spent by the government can raise the aggregate demand for goods and services by more than a dollar, government purchases are said to have a multiplier effect (乘数效应) on aggregate demand. This multiplier effect arises because increases in aggregate income stimulate additional spending by consumers. (2)While an increase in government purchases stimulates the aggregate demand for goods and services, it also causes the interest rate to rise, which reduces investment spending and puts downward pressure on aggregate demand. The reduction in aggregate demand is called the crowding-out effect (挤出效应). 70. Three Types of Unemployment 失业的类型 (1)The normal rate of unemployment around which the unemployment rate fluctuates is called the natural rate of unemployment (自然失业率), and the deviation of unemployment from its natural rate is called cyclical unemployment (周期性失业). (2)Frictional unemployment (摩擦性失业) happens because it takes time for workers to search for the jobs that best suit their tastes and skills. (3)Structural unemployment (结构性失业) happens because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one. This occurs when the quantity of labor supplied exceeds the quantity demanded. 71. Price Discrimination (价格歧视) Firms sell the same good to different customers for different prices, even though the costs of producing for the two customers are the same. This practice is called price discrimination. For a firm to price discriminate, it must have some market power. (1)Perfect price discrimination (完全价格歧视) describes a situation in which the monopolist knows exactly each customer’s willingness to pay and can charge each customer a different price. In this case, the monopolist charges each customer exactly his or her willingness to pay, and the monopolist gets the entire surplus in every transaction. (2)Imperfect price discrimination (不完全价格歧视) describes a situation in which the firm divides customers into different groups and charge each group different prices according to the price elasticity of demand. So it will charge the group with lower elasticity high price but low price with higher elasticity. 72. Economy of Scale 规模经济 When long-run average total cost declines as output increases, there are said to be economies of scale (规模经 济). When long-run average total cost rises as output increases, there are said to be diseconomies of scale (规 模不经济). When long-run average total cost does not vary with the level of output, there are said to be constant returns to scale (规模报酬不变). 73. The Theory of Efficient Wages (效率工资理论) In many jobs, workers have some discretion over how hard to work. As a result, firms monitor the efforts of their workers, and workers caught shirking their responsibilities are fired. But not all shirkers are caught immediately because monitoring workers is costly and imperfect. A firm in such a circumstance is always looking for ways to deter shirking. One solution is paying wages above the equilibrium level. High wages make workers more eager to keep their jobs and, thereby, give workers an incentive to put forward their best effort. If the wage were at the level that balanced supply and demand, workers would have less reason to work hard because if they were fired, they could quickly find new jobs at the same wage. Therefore, firms raise wages above the equilibrium level, providing an incentive for workers not to shirk their responsibilities. 74. Commodity Money and Fiat Money 商品货币与法定货币 - 15 - (1)When money takes the form of a commodity with intrinsic value, it is called commodity money (商品货币). The term intrinsic value means that the item would have value even if it were not used as money. One example of commodity money is gold. (2)Money without intrinsic value is called fiat money (法定货币). A fiat is an order or decree, and fiat money is established as money by government decree. 75. The Prisoners’ Dilemma (囚徒困境) The prisoners’ dilemma is a particular “game” between two captured prisoners that illustrates why cooperation is difficult to maintain even when cooperation would make them all better off. An oligopoly is just one example. The story of the prisoners’ dilemma contains a general lesson that applies to any group trying to maintain cooperation among its members. 76. Dominant Strategy (占优策略) A strategy is called a dominant strategy if it is the best strategy for a player to follow regardless of the strategies pursued by other players. 77. Nash equilibrium (纳什均衡) A Nash equilibrium a situation in which economic actors interacting with one another each choose their best strategy given the strategies the others have chosen. 78. Income Effect and Substitution Effect 收入效应与替代效应 The impact of a change in the price of a good on consumption can be decomposed into two effects: an income effect and a substitution effect. The income effect (收入效应) is the change in consumption that results from the movement to a higher indifference curve. The substitution effect (替代效应) is the change in consumption that results from being at a point on an indifference curve with a different marginal rate of substitution. For example, there is a consumer who just consumes two products, Pepsi and Pizza. The decrease in the price of Pepsi makes the consumer better off. If pizza and Pepsi are both normal goods, the consumer will want to spread this improvement in his purchasing power over both goods. This income effect tends to make the consumer buy more pizza and more Pepsi. Yet at the same time, consumption of Pepsi has become less expensive relative to consumption of pizza. This substitution effect tends to make the consumer choose less pizza and more Pepsi. 79. Indifference Curve and marginal rate of substitution 无差异曲线与边际替代率 (1)An indifference curve shows the various bundles of consumption that make the consumer equally happy. In this case, the indifference curves show the combinations of pizza and Pepsi with which the consumer is equally satisfied. (2)The slope at any point on an indifference curve equals the rate at which the consumer is willing to substitute one good for the other. This rate is called the marginal rate of substitution (MRS). In this case, the marginal rate of substitution measures how much Pepsi the consumer requires to be compensated for a one unit reduction in pizza consumption. 80. Inflation Tax 通胀膨胀税 When the government raises revenue by printing money, it is said to levy an inflation tax. When the government prints money, the price level rises, and the money in your wallet are less valuable. Thus, the inflation tax is like a tax on everyone who holds money. 81. Market failure 市场失灵 - 16 - Market failure refers to a situation in which the market on its own fails to produce an efficient allocation of resources. One possible cause of market failure is an externality (外部性). Another possible cause of market failure is market power (市场势力), which refers to the ability of a single person (or small group) to have a substantial influence on market prices, such as monopoly (垄断) and oligopoly (寡头). 82. Why Monopoly Arise? 垄断的成因 A firm is a monopoly (垄断) if it is the sole seller of its product and if its product does not have close substitutes. The fundamental cause of monopoly is barriers to entry (进入壁垒): A monopoly remains the only seller in its market because other firms cannot enter the market and compete with it. Barriers to entry, in turn, have three main sources: (1)Monopoly resources: A key resource required for production is owned by a single firm. (2)Government regulation: The government gives a single firm the exclusive right. (3)Natural monopoly: A single firm can produce output at a lower cost than can a larger number of producers. 83. Natural-rate Hypothesis 自然率假说 The natural-rate hypothesis claims that unemployment eventually returns to its normal or natural rate, regardless of the rate of inflation 84. Price Ceiling and Price Floor限制价格与支持价格 (1)Price ceiling is a legal maximum on the price at which a good can be sold. When the government imposes a binding price ceiling on a competitive market, a shortage of the good arises, and sellers must ration the scarce goods among the large number of potential buyers. (2)Price floor is a legal minimum on the price at which a good can be sold. When the government imposes a binding price ceiling on a competitive market, a surplus of the good arises. 85. Production Possibilities Frontier 生产可能性边界 The production possibilities frontier is a graph that shows the various combinations of output that the economy can possibly produce given the available factors of production and the available production technology that firms use to turn these factors into output. The economy can produce any combination on or inside the frontier. Points outside the frontier are not feasible given the economy’s resources. 86. Sacrifice Ratio 牺牲比率 The sacrifice ratio is the number of percentage points of annual output lost in the process of reducing inflation by 1 percentage point. A typical estimate of the sacrifice ratio is 5. That is, for each percentage point that inflation is reduced, 5 percent of annual output must be sacrificed in the transition. 87. Shoe-leather Cost 鞋垫成本 The cost of reducing your money holdings is called the shoe-leather cost of inflation because making more frequent trips to the bank causes your shoes to wear out more quickly. The actual cost of reducing your money holdings is not the wear and tear on your shoes but the time and convenience you must sacrifice to keep less money on hand than you would if there were no inflation. 88. Menu Cost 菜单成本 Firms change prices infrequently because there are costs of changing prices. Costs of price adjustment are called menu costs, a term derived from a restaurant’s cost of printing a new menu. Menu costs include the cost of deciding on new prices, the cost of printing new price lists and catalogs, the cost of sending these new price lists and catalogs to dealers and customers, the cost of advertising the new prices, and even the cost of dealing with customer annoyance over price changes. - 17 - 89. Supply Shock 供给冲击 A supply shock is an event that directly affects firms’ costs of production and thus the prices they charge; it shifts the economy’s aggregate-supply curve leftward and leads high price but low output. For example, when an oil price increase raises the cost of producing gasoline, heating oil, tires, and many other products, it reduces the quantity of goods and services supplied at any given price level. - 18 -