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.Management Sciences
Category: Foreign Exchange
If the Bank of England reduces the money supply to reduce inflation a floating exchange rate will aid the Bank of England in fighting inflation because ?
A. as the money supply is decreased the interest rate will increase and the price of UK exports will rise and the Price of UK imports will fall
B. as the money supply is decreased the interest rate will increase, and the price of UK exports will fall and the price of UK imports will rise
C. as the money supply is decreased the interest rate will increase and the price of UK exports and UK imports will fall.
D. as the money supply is decreased the interest rate will increase and the price of both UK exports and UK imports will rise
The exchange rate is kept the same across geographically separate markets by ?
A. hedging
B. speculation
C. government regulation
D. arbitrage
The difference between bid (buying) rates and ask (selling) rates is called the ?
A. profit
B. arbitrage
C. spread
D. forward transaction
Suppose that a Swiss television set that costs 400 francs in Switzerland cost $200 in the United States. The exchange rate between the franc and the dollar is ?
A. 2 francs per dollar
B. 1 franc per dollar
C. $2 per franc
D. $3 per franc
An important feature of a _______ is that the holder has the right but not the obligation to buy or sell currency ?
A. Swap
B. foreign exchange arbitrage
C. foreign exchange option
D. futures market contract
The fall in value of one currency relative to another is ?
A. a depreciation of a currency
B. a strengthening of a currency
C. a floating of a currency
D. an appreciation of a currency
Currency speculation is _____ if speculators bet against market forces that cause exchange fluctuations, thus moderating such fluctuations ?
A. destabilizing
B. stabilizing
C. inflationary
D. deflationary
In 1971, most countries ?
A. adopted a new system of fixed exchange rates
B. gave up trying to fix exchange rates formally and began allowing them to be determined essentially by supply and demand
C. adopted single internationally accepted currency whose use is limited to international transactions
D. returned to the gold standard
The least common type of transaction in the foreign exchange is a ?
A. forward transaction
B. spot transaction
C. swap transaction
D. None of the above
Expansionary monetary policy ?
A. tends to lead to an appreciation of a nation’s currency
B. tends to lead to a depreciation of a nation’s currency
C. usually has no effect on a currency’s exchange value
D. tends to lead to a depreciation of the currencies of other nations
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