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
