Question 1

When entities purchase assets denominated in foreign currencies,those entities are:

Accepted Answer

A) decreasing the supply of the foreign currency because they are using the foreign currency to purchase the assets. 
B) not affecting the supply of the foreign currency involved because there is a finite supply of any currency. 
C) creating a supply of the foreign currency because they are paying for those purchases in the foreign currency. 
D) not affecting the supply of foreign currency because the supply of a currency can only be changed by the central bank that controls the currency. 
A) decreasing the supply of the foreign currency because they are using the foreign currency to purchase the assets. 
B) not affecting the supply of the foreign currency involved because there is a finite supply of any currency. 
C) creating a supply of the foreign currency because they are paying for those purchases in the foreign currency. 
D) not affecting the supply of foreign currency because the supply of a currency can only be changed by the central bank that controls the currency.

Question 2

The graph of demand for a currency is a line that slopes down to the right,which indicates that demand:

Accepted Answer

A) increases as the value of the currency increases. 
B) increases as the units of currency bought increases. 
C) decreases as the value of the currency increases. 
D) decreases as the units of the currency bought decreases. 
A) increases as the value of the currency increases. 
B) increases as the units of currency bought increases. 
C) decreases as the value of the currency increases. 
D) decreases as the units of the currency bought decreases.

Question 3

A disadvantage of using a pegged currency system is that:

Accepted Answer

A) the country whose currency is pegged must decide on its own economic policies. 
B) the country whose currency is pegged does not have the option of adopting economic policies different from those of the country to which the currency is pegged. 
C) the cost of maintaining the peg is substantial and must be paid by those transacting business in the country whose currency is pegged. 
D) international currency markets shun currency whose value is pegged to another currency. 
A) the country whose currency is pegged must decide on its own economic policies. 
B) the country whose currency is pegged does not have the option of adopting economic policies different from those of the country to which the currency is pegged. 
C) the cost of maintaining the peg is substantial and must be paid by those transacting business in the country whose currency is pegged. 
D) international currency markets shun currency whose value is pegged to another currency.

Question 4

A change in prices not the result of product improvement is called inflation and is generally considered to be a negative economic development,but:

Accepted Answer

A) downward changes in prices,or deflation,is a positive economic development and can offset inflation. 
B) inflation is not uniform across all product categories,so inflation may negatively affect only certain product categories. 
C) inflation generally does not last long and is self-correcting,so monetary authorities do not consider inflation to be a concern for currency values. 
D) but inflation affects all product categories,so prices of products relative to each other do not change. 
A) downward changes in prices,or deflation,is a positive economic development and can offset inflation. 
B) inflation is not uniform across all product categories,so inflation may negatively affect only certain product categories. 
C) inflation generally does not last long and is self-correcting,so monetary authorities do not consider inflation to be a concern for currency values. 
D) but inflation affects all product categories,so prices of products relative to each other do not change.

Question 5

The values of currencies that freely floating are determined by:

Accepted Answer

A) central banks. 
B) currency boards. 
C) market forces. 
D) the gold standard. 
A) central banks. 
B) currency boards. 
C) market forces. 
D) the gold standard.

Question 6

When a country pegs the value of its currency to the value of some other currency,that country:

Accepted Answer

A) formally agrees not to adopt economic policies that are inconsistent with those of the country to which the currency is pegged. 
B) by necessity has to follow the macroeconomic policies of the country to which the currency is pegged. 
C) is free to adopt its own economic policy without regard to the economic policies of the country to which the currency is pegged. 
D) is free to adopt its own economic policies but is required to consult with the country to which the currency is pegged. 
A) formally agrees not to adopt economic policies that are inconsistent with those of the country to which the currency is pegged. 
B) by necessity has to follow the macroeconomic policies of the country to which the currency is pegged. 
C) is free to adopt its own economic policy without regard to the economic policies of the country to which the currency is pegged. 
D) is free to adopt its own economic policies but is required to consult with the country to which the currency is pegged.

Question 7

Widespread speculation that a currency's value will change significantly in the near future can cause:

Accepted Answer

A) the currency value to decrease precipitously. 
B) short-term investors to lose confidence in the currency. 
C) long-term investors to lose confidence in the currency. 
D) the currency value to increase precipitously. 
A) the currency value to decrease precipitously. 
B) short-term investors to lose confidence in the currency. 
C) long-term investors to lose confidence in the currency. 
D) the currency value to increase precipitously.

Question 8

The mint parity rate is determined by:

Accepted Answer

A) comparing the amount of gold necessary to buy the same number of units of two different currencies. 
B) determining the cost of minting a certain number of coins representing a certain currency. 
C) comparing the gold standard rate of a currency with its exchange rate. 
D) comparing the exchange rate changes of a currency over a period of time. 
A) comparing the amount of gold necessary to buy the same number of units of two different currencies. 
B) determining the cost of minting a certain number of coins representing a certain currency. 
C) comparing the gold standard rate of a currency with its exchange rate. 
D) comparing the exchange rate changes of a currency over a period of time.

Question 9

As the Bretton Woods Agreement was being abandoned and new approaches to dealing with currency valuations were being sought,the economies of the United States and other major countries were weakening.This weakening was evidenced by:

Accepted Answer

A) higher exports,higher inflation and rising currency values. 
B) declining currency values,an outflow of gold and higher interest rates. 
C) lower imports,higher exports and stable currency values. 
D) higher imports,higher inflation and outflow of a nation's currency. 
A) higher exports,higher inflation and rising currency values. 
B) declining currency values,an outflow of gold and higher interest rates. 
C) lower imports,higher exports and stable currency values. 
D) higher imports,higher inflation and outflow of a nation's currency.

Question 10

In a currency board arrangement:

Accepted Answer

A) the currency board can adjust either of the two currencies involved. 
B) the currency board determines the exchange rate. 
C) the two currencies involved float independently of each other. 
D) the two currencies involved maintain a fixed exchange rate. 
A) the currency board can adjust either of the two currencies involved. 
B) the currency board determines the exchange rate. 
C) the two currencies involved float independently of each other. 
D) the two currencies involved maintain a fixed exchange rate.

When entities purchase assets denominated in foreign currencies,those entities are:

The graph of demand for a currency is a line that slopes down to the right,which indicates that demand:

A disadvantage of using a pegged currency system is that:

A change in prices not the result of product improvement is called inflation and is generally considered to be a negative economic development,but:

The values of currencies that freely floating are determined by:

When a country pegs the value of its currency to the value of some other currency,that country:

Widespread speculation that a currency's value will change significantly in the near future can cause:

The mint parity rate is determined by:

As the Bretton Woods Agreement was being abandoned and new approaches to dealing with currency valuations were being sought,the economies of the United States and other major countries were weakening.This weakening was evidenced by:

In a currency board arrangement:

Introduction

International Financial Markets: Structure and Innovation

Currency and Eurocurrency Derivatives

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters

Exam 4: Currency Systems and Valuation

When entities purchase assets denominated in foreign currencies,those entities are:

The graph of demand for a currency is a line that slopes down to the right,which indicates that demand:

A disadvantage of using a pegged currency system is that:

A change in prices not the result of product improvement is called inflation and is generally considered to be a negative economic development,but:

The values of currencies that freely floating are determined by:

When a country pegs the value of its currency to the value of some other currency,that country:

Widespread speculation that a currency's value will change significantly in the near future can cause:

The mint parity rate is determined by:

As the Bretton Woods Agreement was being abandoned and new approaches to dealing with currency valuations were being sought,the economies of the United States and other major countries were weakening.This weakening was evidenced by:

In a currency board arrangement:

Introduction

International Financial Markets: Structure and Innovation

Currency and Eurocurrency Derivatives

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters