EC-100
governments participate in the foreign exchange market through their a. central banks b. elected representatives c. judicial systems d. stock markets
Central banks
in the exchange rate quotation USD / EUR = 0.73, USD is the ____ currency a. quote b. base c. pegged d. Counter
base
and exchange rate quotation that uses domestic currency as the base currency is known as a(n) ___ quotation a. indirect b. Home c. free-floating d. Direct
direct
almost every major economy in the world has ____ currency a. strong b. pegged c. free-floating d. counter
free-floating
which of the following economic factor strengthens currency value: a. high interest rates b. increased inflation c. A trade deficit d. high government debt
high interest rates
which of the following is an advantage of a week dollar: a. it encourages exports b. employee wages go up c. more jobs are created d. increase more consumer spending
it encourages exports
which of the following is a true statement about the foreign exchange market: a. it is open three days a week b. is the worlds second largest financial market c. it operates only within the United States d. it is a decentralized market
it is a Decentralized market
what tends to occur when a country is experiencing political instability? a. commodity trade increases b. domestic trade improves c. it's currency loses value d. unemployment rates decrease
it's currently loses value
developing country sets it's currency to be the same value as the US dollar. This is called a(n) a. pegged currency b. indirect exchange rate quotation c. free-floating currency d. Direct exchange rate quotation
pegged currency
The value of a currency in a foreign exchange rate system is determined by a. supply and demand b. The world economic commission c. International banks d. previous exchange rate data
supply and demand
in the exchange rate quotation GBP / JPY = 171.93, JPY is the ____ currency a. strong b. base c. quote d. free-floating
quote
which of the following is a reason for pegging currency: a. to weaken in another country's currency b. to impede trade c. to stabilize currency d. To "let The market decide"
to stabilize currency
forwards and options are types of a. interbank markets b. Exchange rate quotations c. trading instruments d. counter currencies
trading Instruments
an exchange rate indicates one currency's value in relation to a. another currency b. it's value from a year ago c. an average of all world currencies d. the US dollar
another currency
The biggest traders of currency on the foreign exchange market are a. commercial and investment banks b. governments c. individuals d. businesses and corporations
commercial and investment banks
if a country exports more than imports, the demand for the country's currency will likely a. decrease b. stabilize overtime c. remain the same d. increase
Increase
which of the following is a political influence that can affect currency value: a. tax increase or cuts b. change in executive leadership c. overall attitude toward the market d. Low levels of inflation
change in executive leadership
in a floating exchange rate system, currency values are determined by a. A corporations business strategies b. a nations import quotas c. changes in supply and demand d. The world trade Federation
changes in supply and demand
What is the benefit to the united states if the value of the US dollars weaker than other world currencies? a. exports increase b. The trade deficit increases c. imports are cheaper d. trade balances are equal
exports increase
pegged currency is also known as ___ currency a. fixed b. free-floating c. weak d. risky
fixed
A country with an established, steady economy is most likely to use a ____ exchange rate a. pegged b. floating c. fixed d. perfect
floating
which of the following is an advantage of strong currency: a. it makes exports more expensive for foreign consumers b. it makes domestic businesses more attractive to foreign investors c. it raises the cost of living d. it boosts consumer confidence
it boosts consumer confidence
which of the following is an advantage of weak currency: a. it improves global perception of the domestic economy b. it inhibits business expansion in the foreign markets c. it boosts exports d. it makes buying imports cheaper
it boosts exports
which the following is a disadvantage of weak currency: a. it reduces business profits b. it makes buying imports less expensive c. it makes acquiring foreign companies more expensive d. it negatively effects the balance of trade
it makes acquiring foreign companies more expensive
which of the following factors is most likely to cause a country's currency value to fall: a. standards b. fewer exports c. decentralization d. rapid inflation
rapid inflation
when an unsettling international event occurs, it can cause traders to feel fearful and by only currencies that are considered strong and stable. These currencies are often called a. futures b. safe Havens c. spots d. base currencies
safe Havens
corporations participate in the foreign exchange market so that they can a. achieve economic goals for the nation b. complete transactions with foreign businesses smoothly c. purchase securities for their clients d. make a profit from currency speculation
complete transactions with foreign businesses smoothly
A nations currency exchange rate is likely to increase when a. stock values fluctuate b. an economic contraction occurs c. A labor force shrinks d. consumer confidence is high
consumer confidence is high
currency speculation is risky because a. predicting currency values is relatively easy b. it can be extremely profitable c. it can lead to high inflation d. it is a practice very few traders participate in
it can lead to high inflation
which of the following is a disadvantage of strong currency: a. it attracts foreign travelers b. it creates a drop in export sales c. it makes imports cheaper d. it lowers global opinion of the domestic economy
it creates a drop in export sales