EC-030 Practice

To increase in value

appreciate

An agreement to buy/sell currency at the current exchange rate

spot

Which of the following is a true statement about currency exchange rates:

currency exchange rates change frequently.

foreign currency is the base currency, and the domestic currency is the quote currency in what

indirect quotation

Buying, selling, and holding currency in an effort to profit through exchange-rate fluctuations

speculation

The currency on the left side of the slash in an exchange-rate quotation

base currency

A state of having more expenditures than revenues

budget deficit

What is a government's main monetary authority, charged with issuing currency, carrying out fiscal policies, and accomplishing the nation's economic goals

central bank

Describe free-floating currency.

currency's value is determined by the foreign exchange market.

To decrease in value

depreciate

what is the rate at which one currency can be sold for another, or the measure of one currency's value in terms of another.

exchange rate

Exchange rates are always expressed in pairs, called

exchange-rate quotations

What is the largest financial market in the world, with a trading volume of nearly $4 trillion each day?

foreign exchange market

A contract to buy/sell currency at an agreed-upon rate

forward

Any medium used for borrowing purposes on a financial market

instrument

What is a series of electronic networks used only for commercial banking institutions

interbank market

The value of a country's currency declines when it implements policies that restrict trade. The primary factor affecting the change in value of the currency in this situation is

isolationism

A country is experiencing civil unrest. What is likely to happen to the value of its currency?

it will decrease.

The overall attitude toward the market at any given time is referred to as

market psychology

Why is the forex/currency market known as a decentralized market?

no one physical location where investors go to buy or sell currencies

A right—but not an obligation—to exchange currency at an agreed-upon rate

option

Also called fixed currency because its value is "fixed" to another country's currency.

pegged currency

The currency on the right side of the slash in an exchange-rate quotation

quote currency

What is a currency deemed stable or strong?

safe havens