Economics MCQs

Page No. 206

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


aprofit


barbitrage


cspread


dorward transaction


View Answer spread

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


a forward transaction


bspot transaction


c swap transaction


dNone of the above



The reduction or covering of foreign exchange risk is called ?


ahedging


bspeculation


cintervention


darbitrage


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


cincrease in the supply of yen


ddecrease in the Supply of yen



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


b America’s demand for Swiss merchandise falls


c Switzerland’s demand for American merchandise rises


dSwitzerland’s demand for American merchandise falls



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


bforeign currency option


ccable transfer


d bill of exchange



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


aconstant


binelastic


celastic


dUnitary elastic


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


bdecrease; appreciate


c increase; depreciate


dincrease; appreciate


View Answer increase; appreciate

The supply of foreign currency tends to be ?


aupward sloping


bdownward sloping


cvertical


dany of the above


View Answer upward sloping

The J-curve effect refers to the observation that ?


aGDP usually decreases before it increases after a currency depreciation


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


dGDP usually decreases before it increases after a currency appreciation



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