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Multiple Choice Quiz
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1
The foreign exchange market:
A)is for converting the currency of one country into the currency of another.
B)is simply the rate at which one currency is converted into another.
C)is to provide some insurance against exchange risk.
D)is the short term movement of funds among currencies in the hopes of profiting from shifts in the rates.
E)the rate at which a foreign exchange dealer converts a currency at a particular time.
2
A market for converting the currency of one country into that of another is called a(n):
A)free trade market.
B)FDI market.
C)foreign exchange market.
D)currency Speculation market.
E)arbitrage market.
3
An exchange rate:
A)is for converting the currency of one country into the currency of another.
B)is simply the rate at which one currency is converted into another.
C)is to provide some insurance against exchange risk.
D)is the short term movement of funds among currencies in the hopes of profiting from shifts in the rates.
E)the rate at which a foreign exchange dealer converts a currency at a particular time.
4
Adverse consequences of unpredictable changes in exchange rates refers to:
A)free trade limitation.
B)FDI aftermath.
C)arbitrage.
D)foreign exchange risk.
E)International Fisher Effect.
5
Which of these is not a main use of the foreign exchange markets?
A)Converting the payments received from exports and/or licensing contracts.
B)Paying a foreign company for its products/services.
C)Investing for short-term in money markets.
D)Currency speculation.
E)Meeting the payroll needs of the domestic employees.
6
Currency speculation:
A)is for converting the currency of one country into the currency of another.
B)is simply the rate at which one currency is converted into another.
C)is to provide some insurance against exchange risk.
D)is the short term movement of funds among currencies in the hopes of profiting from shifts in the rates.
E)the rate at which a foreign exchange dealer converts a currency at a particular time.
7
The spot exchange:
A)is for converting the currency of one country into the currency of another.
B)is simply the rate at which one currency is converted into another.
C)is to provide some insurance against exchange risk.
D)is the short term movement of funds among currencies in the hopes of profiting from shifts in the rates.
E)the rate at which a foreign exchange dealer converts a currency at a particular time.
8
_______ occurs when two parties agree to exchange currency and execute the deal at some specific date in the future.
A)Currency arbitrage
B)Restricted trade
C)Spot currency exchange
D)International Fisher Effect
E)Forward exchange
9
Which of these states that in competitive markets, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency?
A)Arbitrage play
B)Purchasing power parity
C)Law of one price
D)International fisher effect
E)Currency speculation
10
_______ markets are markets in which few impediments to international trade exist.
A)Foreign exchange
B)Efficient
C)Empirical
D)Forward
E)Relatively efficient
11
_______ occurs when the quantity of money in circulation rises faster than the stock of goods and services.
A)Money supply
B)Deflation
C)Inflation
D)Currency swap
E)Deregulation
12
Which of the following determines whether the rate of growth in a country's money supply is greater than the rate of growth of output?
A)Consumers
B)Government policy
C)Business
D)Foreign trade
E)The stock market
13
Which of these analyses draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements?
A)Arbitrage
B)Technical
C)Currency speculation
D)Forward exchange
E)Fundamental
14
Which analysis uses price and volume data to determine past trends, which are expected to continue into the future?
A)Arbitrage
B)Technical
C)Currency speculation
D)Forward exchange
E)Fundamental
15
A currency is said to be __________ when only nonresidents may convert it into a foreign currency without any limitations.
A)nonconvertible
B)restricted access currency
C)externally convertible
D)arbitraged currency
E)freely convertible
16
_______ refers to a range of barter like agreements by which goods and services can be traded for other goods and services.
A)Arbitrage
B)Counter trade
C)Forward exchange
D)Selling short
E)Hedge fund





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