Economics MCQs

Page No. 206

The difference between bid (buying) rates and ask (selling) rates is called the ?


aprofit

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barbitrage

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cspread

✓


dorward transaction

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View Answer spread

The least common type of transaction in the foreign exchange is a ?


a forward transaction

✓


bspot transaction

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c swap transaction

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dNone of the above

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The reduction or covering of foreign exchange risk is called ?


ahedging

✓


bspeculation

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cintervention

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darbitrage

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View Answer hedging

Suppose there occurs an increase in the Canadian demand for Japanese computers This results in a (an) ?


aincrease in the demand for yen

✓


b decrease in the demand for yen

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cincrease in the supply of yen

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ddecrease in the Supply of yen

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Given the foreign currency market for the Swiss franc, the supply of franc slopes upward, because as the dollar price of the franc rises ?


aAmerica’s demand for Swiss merchandise rises

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b America’s demand for Swiss merchandise falls

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c Switzerland’s demand for American merchandise rises

✓


dSwitzerland’s demand for American merchandise falls

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Which financial instrument provides a buyer the right to purchase or sell a fixed amount of currency at a prearranged price, within a few days to a couple of years ?


a letter a credit

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bforeign currency option

✓


ccable transfer

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d bill of exchange

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A depreciation of the dollar will have its most pronounced impact on imports if the demand for imports is ?


aconstant

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binelastic

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celastic

✓


dUnitary elastic

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View Answer elastic

In the early eighties, the Federal Reserve pursed a tight monetary policy. All else being equal. the impact of that policy was to interest rates in the United States relative to those in Europe and cause the dollar to _______ against European currencies?


adecrease; depreciate

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bdecrease; appreciate

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c increase; depreciate

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dincrease; appreciate

✓


View Answer increase; appreciate

The supply of foreign currency tends to be ?


aupward sloping

✓


bdownward sloping

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cvertical

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dany of the above

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View Answer upward sloping

The J-curve effect refers to the observation that ?


aGDP usually decreases before it increases after a currency depreciation

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bthe trade balance usually gets worse before it improves after a currency depreciation

✓


cthe trade balance usually gets better before it gets worse after a currency appreciation

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dGDP usually decreases before it increases after a currency appreciation

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