Economics MCQs

Page No. 208

Which of the following is not a reason why Joe Smith (an American) might participate as a demander in the foreign exchange market ?


ahis desire to open a bank account in Japan

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b his desire to purchase an automobile produced domestically

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chis desire to travel to Europe

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dhis desire to purchase Treasury bills issued by the British government

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If Sweden’s currency depreciates relative to Norway’s currency ?


a Norway’s export goods become more expensive to Norway’s residents

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bNorway’s exports goods become cheaper to Sweden’s residents

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cSweden’s export goods become cheaper to Norway’s residents

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dSweden’s export goods become cheaper to Sweden’s residents

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The franc is said to be selling at a _______ if the spot dollar price is $0.48 and the nine-month forward rate is $0.42 ?


aforward discount

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bforward premium

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cforward spread

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d None of these

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View Answer forward discount

Riskless transactions to take advantage of profit opportunities due to a price differential or a yield differential in excess of transaction costs are called ?


adifferential actions

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bcash transaction

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carbitrage

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dforward transactions

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View Answer arbitrage

If the bank is selling francs for $0.45, then what is the implied franc price of the dollar ?


a2.0

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b1.999

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c2.323

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d2.222

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View Answer 2.222

An important feature of a _______ is that the holder has the right but not the obligation to buy or sell currency ?


aSwap

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bforeign exchange arbitrage

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c foreign exchange option

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dfutures market contract

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The exchange rate is kept the same across geographically separate markets by ?


ahedging

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bspeculation

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c government regulation

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darbitrage

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View Answer arbitrage

In a supply and demand diagram for Japanese yen, with the exchange rate in dollars per yen on the vertical axis, the demand schedule for yen is drawn sloping ?


aupward

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bvertical

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cdownward

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dhorizontal

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View Answer downward

The largest volume of foreign exchange trading takes place in ?


aChina

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bGermany

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cUnited Kingdom

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dUSA

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View Answer United Kingdom

During the era of dollar appreciation from 1981 to 1985 a main reason why the dollar did not fall in value was ?


aflows of foreign investment into the United States

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b rising price inflation in the United States

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ca substantial decrease in U.S imports

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da substantial increase in U.S exports

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