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


b his desire to purchase an automobile produced domestically


chis desire to travel to Europe


dhis desire to purchase Treasury bills issued by the British government



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


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


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


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


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



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


bforward premium


cforward spread


d None of these


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


bcash transaction


carbitrage


dforward transactions


View Answer arbitrage

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


a2.0


b1.999


c2.323


d2.222


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


bforeign exchange arbitrage


c foreign exchange option


dfutures market contract



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


ahedging


bspeculation


c government regulation


darbitrage


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


bvertical


cdownward


dhorizontal


View Answer downward

The largest volume of foreign exchange trading takes place in ?


aChina


bGermany


cUnited Kingdom


dUSA


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


b rising price inflation in the United States


ca substantial decrease in U.S imports


da substantial increase in U.S exports



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