EC-100 Posttest

When an unsettling international event occurs, it can cause traders to feel fearful and buy only currencies that are considered strong and stable. These currencies are often called

"safe havens"

Which of the following economic factors strengthens currency value:

High interest rates

Which of the following is an advantage of strong currency:

It boosts consumer confidence.

Which of the following is an advantage of weak currency:

It boosts exports.

Which of the following is a disadvantage of strong currency:

It creates a drop in export sales.

Which of the following is a true statement about the foreign exchange market:

It is a decentralized market.

Which of the following is a disadvantage of weak currency:

It makes acquiring foreign companies more expensive.

Which of the following is a reason for pegging currency:

To stabilize currency

An exchange rate indicates one currency's value in relation to

another currency

In the exchange rate quotation USD / EUR = 0.73, USD is the __________ currency.

base

Governments participate in the foreign exchange market through their

central banks

Which of the following is a political influence that can affect currency value:

change in executive leadership

The biggest traders of currency on the foreign exchange market are

commercial and investment banks.

Corporations participate in the foreign exchange market so that they can

complete transactions with foreign businesses smoothly.

An exchange rate quotation that uses domestic currency as the base currency is known as a(n) __________ quotation.

direct

Pegged currency is also known as __________ currency.

fixed

Almost every major economy in the world has __________ currency.

free-floating

Currency speculation is risky because

it can lead to high inflation

In the exchange rate quotation GBP / JPY = 171.93, JPY is the __________ currency.

quote

Forwards and options are types of

trading instruments