Question 1

In the long run,foreign exchange rates are determined by:

Accepted Answer

A)  an agreement between governments of the major industrial countries. 
B)  economic fundamentals, such as productivity levels or price levels in different countries. 
C)  the difference between the short-term and long-term interest rates in each country. 
D)  the rate at which each country's currency can be exchanged for gold. 
A)  an agreement between governments of the major industrial countries. 
B)  economic fundamentals, such as productivity levels or price levels in different countries. 
C)  the difference between the short-term and long-term interest rates in each country. 
D)  the rate at which each country's currency can be exchanged for gold.

Question 2

Discuss how relative national income growth may influence exchange rates.

Accepted Answer

A possible mechanism is if a country's n

Question 3

The regime whereby the value of a domestic currency is locked in to a specified multiple of another country is called:

Accepted Answer

A)  preset. 
B)  floating. 
C)  pegged. 
D)  permanent. 
A)  preset. 
B)  floating. 
C)  pegged. 
D)  permanent.

Question 4

The FX rate at the point where the demand and supply curves for a currency intersect is called a/an:

Accepted Answer

A)  balanced exchange rate. 
B)  equilibrium exchange rate. 
C)  intersection exchange rate. 
D)  stable exchange rate. 
A)  balanced exchange rate. 
B)  equilibrium exchange rate. 
C)  intersection exchange rate. 
D)  stable exchange rate.

Question 5

For a country,a fully floating currency regime:

Accepted Answer

A)  allows a government to remove most restrictions on investment flows. 
B)  relieves the central bank of the need to maintain a particular fixed value of the currency in the FX markets. 
C)  does not require a country to maintain large amounts of FX reserves to support the currency. 
D)  all of the given answers are correct. 
A)  allows a government to remove most restrictions on investment flows. 
B)  relieves the central bank of the need to maintain a particular fixed value of the currency in the FX markets. 
C)  does not require a country to maintain large amounts of FX reserves to support the currency. 
D)  all of the given answers are correct.

Question 6

In the _______ run,higher quotas and tariffs cause a country's currency to _______.

Accepted Answer

A)  short; depreciate 
B)  short; appreciate 
C)  long; depreciate 
D)  long; appreciate 
A)  short; depreciate 
B)  short; appreciate 
C)  long; depreciate 
D)  long; appreciate

Question 7

All of the following factors are likely to influence exchange rates,except:

Accepted Answer

A)  financial flows. 
B)  trade flows. 
C)  government intervention. 
D)  an increase in the number of dealers of foreign exchange. 
A)  financial flows. 
B)  trade flows. 
C)  government intervention. 
D)  an increase in the number of dealers of foreign exchange.

Question 8

In international trade flows,an embargo is:

Accepted Answer

A)  a charge levied on imports. 
B)  a government restriction on imports. 
C)  a prohibition on imports of goods and services. 
D)  a tax levied on imports. 
A)  a charge levied on imports. 
B)  a government restriction on imports. 
C)  a prohibition on imports of goods and services. 
D)  a tax levied on imports.

Question 9

If the Japanese yen depreciates against the Australian dollar:

Accepted Answer

A)  Japanese businesses gain by a rise in the dollar price of exports to Australia. 
B)  Japanese consumers gain by a fall in the yen price of Australian exports to Japan. 
C)  Japanese consumers lose on account of a rise in the yen price of Australian exports to Japan. 
D)  Australian consumers lose on account of a rise in the dollar price of Japanese exports to Australia. 
A)  Japanese businesses gain by a rise in the dollar price of exports to Australia. 
B)  Japanese consumers gain by a fall in the yen price of Australian exports to Japan. 
C)  Japanese consumers lose on account of a rise in the yen price of Australian exports to Japan. 
D)  Australian consumers lose on account of a rise in the dollar price of Japanese exports to Australia.

Question 10

A government restriction that places a direct limit on the amount of particular goods that can be imported into a country is called a/an:

Accepted Answer

A)  entry limit. 
B)  embargo. 
C)  quota. 
D)  tariff. 
A)  entry limit. 
B)  embargo. 
C)  quota. 
D)  tariff.

Question 11

The foreign exchange rate regime used by most international countries is a _____ regime.

Accepted Answer

A)  linked 
B)  crawling peg 
C)  managed 
D)  floating 
A)  linked 
B)  crawling peg 
C)  managed 
D)  floating

Question 12

If foreign exchange traders become certain that the value of the yen will rise against the Australian dollar in the future,the likely result is that the:

Accepted Answer

A)  demand for yen will fall in anticipation. 
B)  current value of the yen against the Australian dollar will fall. 
C)  current value of the yen against the Australian dollar will rise. 
D)  nominal rates in Japan will fall. 
A)  demand for yen will fall in anticipation. 
B)  current value of the yen against the Australian dollar will fall. 
C)  current value of the yen against the Australian dollar will rise. 
D)  nominal rates in Japan will fall.

Question 13

Discuss how relative interest rates may influence exchange rates.

Accepted Answer

Interest rates affect exchange rates by

Question 14

It may be argued that a factor that can affect the equilibrium exchange rate is changes in relative income growth between countries.If the growth in Australian national income rises substantially,while that in the USA remains stagnant,which of the following impacts would you expect to occur?

Accepted Answer

A)  A new equilibrium exchange rate may see the AUD depreciate. 
B)  The relative strength of import growth and foreign investment inflows will impact upon the equilibrium exchange rate. 
C)  A new equilibrium exchange rate may see the AUD appreciate. 
D)  All of the given answers are correct. 
A)  A new equilibrium exchange rate may see the AUD depreciate. 
B)  The relative strength of import growth and foreign investment inflows will impact upon the equilibrium exchange rate. 
C)  A new equilibrium exchange rate may see the AUD appreciate. 
D)  All of the given answers are correct.

Question 15

If Australia's national income begins to grow quite rapidly and Australia's demand for German imports grows,then there would be:

Accepted Answer

A)  a decrease of supply of AUD. 
B)  an increase of supply of AUD. 
C)  a decrease in demand for euros. 
D)  no change in demand for AUD. 
A)  a decrease of supply of AUD. 
B)  an increase of supply of AUD. 
C)  a decrease in demand for euros. 
D)  no change in demand for AUD.

Question 16

Relative interest rate levels between countries is a determinant that will,from time to time,impact upon the equilibrium exchange rate.When considering the impact of relative interest rate differentials,which of the following is incorrect?

Accepted Answer

A)  If an increase in the interest rate is a result of an increase in inflationary expectations, all else being constant, the currency will appreciate. 
B)  If an increase in the interest rate is due to an increase in the real rate of interest, all else being constant, the currency will depreciate. 
C)  Interest rate differentials must be viewed together with expected percentage changes in exchange rates over the period. 
D)  All of the given answers are correct. 
A)  If an increase in the interest rate is a result of an increase in inflationary expectations, all else being constant, the currency will appreciate. 
B)  If an increase in the interest rate is due to an increase in the real rate of interest, all else being constant, the currency will depreciate. 
C)  Interest rate differentials must be viewed together with expected percentage changes in exchange rates over the period. 
D)  All of the given answers are correct.

Question 17

Discuss how relative inflation rates may influence exchange rates.

Accepted Answer

Differential inflation rates will influe

Question 18

The Indonesian economy is predicted to average 64% per annum inflation over the next two years.If the forecast inflation for Australia over the same period is 2.5% per annum,how much will a rupiah cost you in two years' time if the current exchange rate is $0.1293/rupiah and PPP is maintained?

Accepted Answer

A)  $0.0505 
B)  $0.0808 
C)  $0.3310 
D)  $0.2069 
A)  $0.0505 
B)  $0.0808 
C)  $0.3310 
D)  $0.2069

Question 19

Under a floating exchange rate regime,central banks may still intervene in the FX market to stabilise volatility in the value of the currency.

Accepted Answer

A) True 
 B)False

Question 20

If the currency AUD/USD moves from 0.9870-75 to 0.9364,there has been:

Accepted Answer

A)  an appreciation of the USD. 
B)  appreciation of the AUD. 
C)  a depreciation of the AUD. 
D)  a change in the bid-offer spread. 
A)  an appreciation of the USD. 
B)  appreciation of the AUD. 
C)  a depreciation of the AUD. 
D)  a change in the bid-offer spread.

Exam 16: Foreign Exchange: Factors That Influence the Exchange Rate

In the long run,foreign exchange rates are determined by:

Discuss how relative national income growth may influence exchange rates.

The regime whereby the value of a domestic currency is locked in to a specified multiple of another country is called:

The FX rate at the point where the demand and supply curves for a currency intersect is called a/an:

For a country,a fully floating currency regime:

In the _______ run,higher quotas and tariffs cause a country's currency to _______.

All of the following factors are likely to influence exchange rates,except:

In international trade flows,an embargo is:

If the Japanese yen depreciates against the Australian dollar:

A government restriction that places a direct limit on the amount of particular goods that can be imported into a country is called a/an:

The foreign exchange rate regime used by most international countries is a _____ regime.

If foreign exchange traders become certain that the value of the yen will rise against the Australian dollar in the future,the likely result is that the:

Discuss how relative interest rates may influence exchange rates.

It may be argued that a factor that can affect the equilibrium exchange rate is changes in relative income growth between countries.If the growth in Australian national income rises substantially,while that in the USA remains stagnant,which of the following impacts would you expect to occur?

If Australia's national income begins to grow quite rapidly and Australia's demand for German imports grows,then there would be:

Relative interest rate levels between countries is a determinant that will,from time to time,impact upon the equilibrium exchange rate.When considering the impact of relative interest rate differentials,which of the following is incorrect?

Discuss how relative inflation rates may influence exchange rates.

The Indonesian economy is predicted to average 64% per annum inflation over the next two years.If the forecast inflation for Australia over the same period is 2.5% per annum,how much will a rupiah cost you in two years' time if the current exchange rate is $0.1293/rupiah and PPP is maintained?

Under a floating exchange rate regime,central banks may still intervene in the FX market to stabilise volatility in the value of the currency.

If the currency AUD/USD moves from 0.9870-75 to 0.9364,there has been:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters

In the _ run,higher quotas and tariffs cause a country's currency to _.