Foreign Exchange For Economics(Economics ) Questions and Answers

Question 1. Under a system of floating exchange rates there is a general tendency for ?
  1.    exchange rates to be insensitive to the differential rates of inflation between countries
  2.    the currencies of relatively high-inflation countries to depreciate
  3.    the currencies of relatively high inflation countries to appreciate
  4.    the currencies of relatively low inflation countries to depreciate
Explanation:-
Answer: Option B. -> the currencies of relatively high-inflation countries to depreciate
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 2. Exchange rates that are determined by the unregulated forces of supply and demand are ?
  1.    floating exchange rates
  2.    pegged exchange rates
  3.    managed exchange rates
  4.    fixed exchange rates
Explanation:-
Answer: Option A. -> floating exchange rates
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 3. A fiscal expansion in the UK ?
  1.    has no predictable effect on the price of the pound sterling?
  2.    does not affect the price of the pound sterling
  3.    tends to appreciate the pound sterling
  4.    tends to depreciate the pound sterling
Explanation:-
Answer: Option C. -> tends to appreciate the pound sterling
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 4. The agreements that were reached at the Bretton Woods conferences in 1944 established a system ?
  1.    of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed
  2.    in which the value of currencies was fixed in terms of a specific number of ounces of gold, which in turn determined their values in international tra
  3.    of floating exchange rates determined of the supply and demand of one nation’s currency relative to the currency of other nations
  4.    That prohibited governments from intervening in the foreign exchange markets
Explanation:-
Answer: Option A. -> of essentially fixed exchange rates under which each country agreed to intervene in the foreign exchange market when necessary to maintain the agreed
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 5. The price of one country’s currency in terms of another country’s currency is the ?
  1.    exchange rate
  2.    balance of trade
  3.    terms of trade
  4.    currency valuation
Explanation:-
Answer: Option A. -> exchange rate
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 6. If the exchange rate is 11 Mexican pesos per U.S dollar, then it takes _______ to buy 1 peso?
  1.    $0.0909
  2.    $0.1002
  3.    $0.2826
  4.    $1.1024
Explanation:-
Answer: Option A. -> $0.0909
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 7. A difference between forward and futures contracts is that ?
  1.    forward contracts occur in a specific locations-for example, the Chicago Mercantile Exchange
  2.    futures contracts have negotiable delivery dates
  3.    forward contracts can be tailored in amount and delivery date to the need of importers of exporters
  4.    futures contracts involve no brokerage fees or other transactions costs
Explanation:-
Answer: Option C. -> forward contracts can be tailored in amount and delivery date to the need of importers of exporters
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 8. Suppose that Boeing is to receive payment in euros in 6 month and wants to engage in hedging the firm would _______ euros on the 6-month forward market in order to protect itself from a/an of the euro?
  1.    sell; appreciation
  2.    sell; depreciation
  3.    buy; depreciation
  4.    buy; appreciation
Explanation:-
Answer: Option B. -> sell; depreciation
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 9. The rise in value of one currency relative to another is ?
  1.    a weakening of a currency
  2.    A depreciation of a currency
  3.    An appreciation of a currency
  4.    a debasement of a currency
Explanation:-
Answer: Option C. -> An appreciation of a currency
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
Question 10. Currency speculation is _____ if speculators bet against market forces that cause exchange fluctuations, thus moderating such fluctuations ?
  1.    destabilizing
  2.    stabilizing
  3.    inflationary
  4.    deflationary
Explanation:-
Answer: Option B. -> stabilizing
NO EXPLANATION IS AVAILABLE FOR THIS QUESTION!
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