price elasticity of demand
The ratio of the percentage change in quantity demanded to the percentage change
in price, assuming that all other factors influencing demand remain unchanged. Also called own price elasticity.
marginal revenue
The change in total revenue that results from a one-unit change in quantity demanded.
income elasticity
The ratio of the percentage change in quantity demanded to the percentage change in income,
assuming that all other factors influencing demand remain unchanged.
cross price elasticity
The ratio of the percentage change in the quantity demanded of Good A to the percentage
change in the price of Good B, assuming that all other factors influencing demand remain unchanged.
Positive:
the two products are referred to as substitutes for each other. The higher the cross price elasticity, the
closer the substitute relationship. Negative: complementary.
heteroscedasticity
about the regression line, error terms do not have constant variance.
Measurement error random errors in measuring an explanatory variable or the dependent variable.
MC=MR

autocorrelation
An econometric problem characterized by the existence
of a significant pattern in the
successive values of the error terms in a linear regression model.
multicollinearity
a high degree of correlation among explanatory variables in a regression equation.
is the mean prediction error, which is to measure the
difference between predicted value and actual data.
Y
t+1
= Y
t
+ w(Y
t
− Y
t
)
Foreign exchange risk exposures are of three types: transaction risk exposure, translation risk exposure,
and operating risk exposure.
transaction risk exposure
A change in cash flows resulting from contractual commitments to pay in or
receive foreign currency.
translation risk exposure
An accounting adjustment in the home currency value of foreign assets or
liabilities.
operating risk exposure
A change in cash flows from foreign or domestic sales resulting from currency
fluctuations.
sterilized interventions
Central bank transactions in the foreign exchange market accompanied by equal
offsetting transactions in the government bond market, in an attempt to alter short-term interest rates without
affecting the exchange rate.
arbitrage
Buying cheap and selling elsewhere for an immediate profit.
speculation
Buying cheap and selling later for a delayed profit (or loss).
relative purchasing power parity
A relationship between differential inflation rates and long-term trends in
exchange rates.
Absolute purchasing power parity implies that differentially higher core price inflation in one location than
another (which results in a doubling of U.S. prices for traded goods like autos, aircraft, and iPods) will
ultimately result in a 50 percent depreciation of the U.S. currency.

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- Spring '14
- Apland,Jeffrey