Deck 32: Foreign Exchange Markets

Question 1

A _____ market is a complex, noncentralized market where currencies are traded.

A) derivatives
B) capital
C) foreign exchange
D) commodity

Answer 1

C

Question 2

A foreign exchange market is a:

A) market where equities are traded.
B) complex, noncentralized market where currencies are traded.
C) market where raw, homogeneous products are bought and sold.
D) market where future contracts and options are traded.

Answer 2

B

Question 3

A _____ market is a complex, noncentralized market where currencies are traded.

A) derivatives
B) capital
C) currency
D) commodity

Answer 3

C

Question 4

The foreign exchange market is located:

A) at the Intercontinental Exchange.
B) in the Chicago Mercantile Exchange.
C) at the New York stock exchange and the London stock exchange.
D) electronically and in many financial firms.

Question 5

The foreign exchange market is _____ currency exchange can take place.

A) in New York city, where
B) in London, where
C) in Brussels, where
D) anywhere that

Question 6

The value of currency that is exchanged in one week:

A) cannot be determined.
B) exceeds the value of U.S. GDP in a year.
C) is always expressed in U.S. dollars.
D) is less than a trillion U.S. dollars.

Question 7

Approximately _____ currencies are exchanged in the foreign exchange market.

A) 35
B) 115
C) 180
D) 300

Question 8

_____ rate is the price of one country's currency in terms of another country's currency.

A) A transfer
B) A value
C) A foreign
D) An exchange

Question 9

If a Japanese firm does business with a firm in Italy, the Japanese firm must convert:

A) euros into yen.
B) yen into euros.
C) yen into dollars.
D) dollars into yen.

Question 10

If a Japanese firm does business with a firm in United States, the Japanese firm must convert:

A) euros into yen.
B) yen into euros.
C) yen into dollars.
D) dollars into yen.

Question 11

If a U.S. firm does business with a firm in Japan, the U.S. firm must convert:

A) euros into yen.
B) yen into euros.
C) yen into dollars.
D) dollars into yen.

Question 12

If a U.S. firm does business with a firm in France, the U.S. firm must convert:

A) euros into yen.
B) dollars into euros.
C) yen into dollars.
D) dollars into yen.

Question 13

If a German firm does business with a firm in the United States, the German firm must convert:

A) euros into yen.
B) dollars into euros.
C) euros into dollars.
D) dollars into yen.

Question 14

If a German firm does business with a firm in Japan, the German firm must convert:

A) euros into yen.
B) dollars into euros.
C) euros into dollars.
D) dollars into yen.

Question 15

An exchange rate is the:

A) price of one country's currency in terms of another country's currency.
B) standard notation that is used to express one currency in terms of another currency.
C) value of currency fluctuations.
D) appreciation of a currency.

Question 16

An exchange rate has _____ currency and a _____ currency.

A) a front; back
B) an upper; lower
C) a base; counter
D) an appreciated; depreciated

Question 17

In the currency pair, USD/EUR .87, the base currency is _____, and the counter currency is:

A) EUR; unknown.
B) unknown; EUR.
C) USD; EUR.
D) EUR; USD.

Question 18

In the currency pair, EUR/JPY 130, the base currency is _____, and the counter currency is:

A) EUR; unknown.
B) unknown; EUR.
C) JPY; EUR.
D) EUR; JPY.

Question 19

In the currency pair USD/EUR, _____ the currency is being considered.

A) neither the USD nor the EUR is
B) the JPY is
C) the USD is
D) the EUR is

Question 20

_____ of a currency is an adjustment in the exchange rate that makes a country's currency more valuable relative to another country's currency.

A) Appreciation
B) Depreciation
C) Manipulation
D) Maneuvering

Question 21

_____ of a currency is an adjustment in the exchange rate that makes a country's currency less valuable relative to another country's currency.

A) Appreciation
B) Depreciation
C) Manipulation
D) Maneuvering

Question 22

_____ occurs when the euro rises in value against the dollar.

A) A manipulation of the dollar
B) A maneuvering of the dollar
C) An appreciation of the euro
D) A depreciation of the euro

Question 23

When the euro falls against the yen, the euro has _____, and the yen has:

A) depreciated; appreciated.
B) depreciated; depreciated.
C) appreciated; depreciated.
D) appreciated; appreciated.

Question 24

If USD/JPY 111.24 changes to USD/JPY 114.2, the dollar has _____, and the yen has:

A) depreciated; appreciated.
B) depreciated; depreciated.
C) appreciated; depreciated.
D) appreciated; appreciated.

Question 25

If USD/EUR .86 changes to USD/EUR .82, the dollar has _____, and the euro has:

A) depreciated; appreciated.
B) depreciated; depreciated.
C) appreciated; depreciated.
D) appreciated; appreciated.

Question 26

When the yen _____ against the euro, the price of goods and services that are produced in Japan are generally _____ in Europe.

A) depreciates; not affected
B) depreciates; less expensive
C) appreciates; not affected
D) appreciates; less expensive

Question 27

When the yen _____ against the euro, the price of goods and services produced in Japan are generally _____ in Europe.

A) depreciates; not affected
B) depreciates; more expensive
C) appreciates; not affected
D) appreciates; more expensive

Question 28

If the USD/EUR .86 changes to USD/EUR .89, the USD has _____, and the EUR has:

A) appreciated; depreciated.
B) depreciated; appreciated.
C) appreciated; appreciated.
D) depreciated; depreciated.

Question 29

The demand for a currency is derived from the _____ for products and financial investments that require that currency.

A) price
B) cost
C) supply
D) demand

Question 30

When Europeans visit Disney World in Florida, they:

A) demand euros in exchange for dollars.
B) supply euros in exchange for dollars.
C) supply dollars in exchange for euros.
D) demand dollars in exchange for euros.

Question 31

If Europeans no longer desire U.S. clothing, the demand for dollars will _____, and the dollar will:

A) decrease; depreciate.
B) decrease; appreciate.
C) increase; depreciate.
D) increase; appreciate.

Question 32

If Europe is experiencing inflation, the demand for euros will _____, and the euro will:

A) decrease; depreciate.
B) decrease; appreciate.
C) increase; depreciate.
D) increase; appreciate.

Question 33

If prices are falling in Japan, the demand for yen will _____, and the yen will:

A) decrease; depreciate.
B) decrease; appreciate.
C) increase; depreciate.
D) increase; appreciate.

Question 34

An increase in tariffs on European goods _____ the demand for euros, and the euro will:

A) decreases; depreciate.
B) decreases; appreciate.
C) increases; depreciate.
D) increases; appreciate.

Question 35

A decrease in tariffs on U.S. goods _____ the demand for dollars, and the dollar will:

A) decreases; depreciate.
B) decreases; appreciate.
C) increases; depreciate.
D) increases; appreciate.

Question 36

If banks in Europe are paying a higher rate of interest on savings accounts, the demand for euros will _____, and the euro will:

A) decrease; depreciate.
B) decrease; appreciate.
C) increase; depreciate.
D) increase; appreciate.

Question 37

If a Japanese bank is paying 2% interest on savings and an American bank is paying 4% interest, the demand for dollars will _____, and the dollar will:

A) decrease; depreciate.
B) decrease; appreciate.
C) increase; depreciate.
D) increase; appreciate.

Question 38

A fall in a country's interest rate will generally cause the currency to _____, and a rise in interest rates will cause the currency to:

A) depreciate; depreciate.
B) depreciate; appreciate.
C) appreciate; depreciate.
D) appreciate; appreciate.

Question 39

(Figure: Currency Shift) In the above figure, the dollar _____, while the euro _____.

A) depreciates; depreciates.
B) depreciates; appreciates.
C) appreciates; depreciates.
D) appreciates; appreciates.

Question 40

(Figure: Currency Shift 0) In the above figure, the dollar _____, while the euro _____.

A) depreciates; depreciates.
B) depreciates; appreciates.
C) appreciates; depreciates.
D) appreciates; appreciates.

Question 41

When a central bank _____ the supply of dollars on the foreign exchange market, the dollar will:

A) floats; depreciate.
B) floats; appreciate.
C) decreases; depreciate.
D) decreases; appreciate.

Question 42

When a central bank _____ the supply of dollars on the foreign exchange market, the dollar will:

A) floats; depreciate.
B) floats; appreciate.
C) increases; depreciate.
D) increases; appreciate.

Question 43

_____ in the exchange rate market is what occurs when the quantity demanded for a country's currency is the same as the quantity supplied of the country's currency.

A) Floating
B) Equilibrium
C) Appreciation
D) Depreciation

Question 44

Equilibrium in the exchange rate market occurs when:

A) two currencies equal each other.
B) three currencies equal each other.
C) the quantity demanded for a country's currency is the same as the quantity supplied of the country's currency.
D) the quantity demanded for a country's currency is greater than the quantity supplied of the country's currency.

Question 45

(Figure: Shifts in the Supply of Dollars)
-In the figure, the dollar is currently at point

A) A
B) B
C) C
D) D

Question 46

(Figure: Shifts in the Supply of Dollars)
-In the figure, the dollar is currently at point

A) move to point
B) move to point
C) move to point
D) not move.

Question 47

(Figure: Shifts in the Supply of Dollars)
-In the figure, the dollar is currently at point

A) A
B) B
C) C
D) D

Question 48

(Figure: Shifts in the Supply of Dollars)
-In the figure, the dollar is currently at point

A) A
B) B
C) C
D) D

Question 49

(Figure: Currency Shift A) In the figure, the dollar _____, while the euro _____.

A) depreciates; depreciates.
B) depreciates; appreciates.
C) appreciates; depreciates.
D) appreciates; appreciates.

Question 50

(Figure: Currency Shift I) In the figure, the dollar _____, while the euro _____.

A) depreciates; depreciates.
B) depreciates; appreciates.
C) appreciates; depreciates.
D) appreciates; appreciates.

Question 51

XYZ Corporation, a major exporter of tires, would generally prefer _____ dollar.

A) an unstable
B) a variable
C) a stronger
D) a weaker

Question 52

When the dollar _____, U.S. products are _____ expensive to the rest of the world.

A) appreciates; less
B) appreciates; more
C) depreciates; more
D) depreciates; equally

Question 53

When the dollar _____, U.S. products are _____ expensive to the rest of the world.

A) appreciates; less
B) appreciates; equally
C) depreciates; more
D) depreciates; less

Question 54

U.S. exports will increase when the dollar depreciates if the depreciation is caused by a decrease in demand for:

A) U.S. goods and services.
B) international trade.
C) financial assets.
D) the other country's currency.

Question 55

U.S. exports will decrease when the dollar depreciates if the depreciation is caused by a decrease in demand for:

A) U.S. goods and services.
B) international trade.
C) financial assets.
D) the other country's currency.

Question 56

When the supply of a domestic currency increases while demand simultaneously decreases, that currency tends to _____ against other currencies.

A) stabilize
B) equal out
C) appreciate
D) depreciate

Question 57

(Figure: Generalized Exchange Rate Model) In the figure, movement from _____ occurs if interest rates increase in Europe.

A) D to B
B) B to D
C) C to A
D) A to C

Question 58

(Figure: Generalized Exchange Rate Model) In the figure, movement from _____ occurs if inflation increases in Europe.

A) D to B
B) B to D
C) C to A
D) A to C

Question 59

(Figure: Generalized Exchange Rate Model) In the figure, movement from _____ occurs if interest rates decrease in the U.S.

A) D to B
B) B to D
C) C to A
D) A to C

Question 60

(Figure: Generalized Exchange Rate Model) In the figure, movement from _____ occurs if inflation decreases in the U.S.

A) D to B
B) B to D
C) C to A
D) A to C

Question 61

(Figure: Generalized Exchange Rate Model) In the figure, movement from _____ occurs if interest rates decrease in Europe.

A) D to B
B) B to D
C) C to A
D) A to C

Question 62

(Figure: Generalized Exchange Rate Model) In the figure, movement from _____ occurs if inflation decreases in Europe.

A) D to B
B) B to D
C) C to A
D) A to C

Question 63

(Figure: Generalized Exchange Rate Model) In the figure, movement from _____ occurs if interest rates increase in the U.S.

A) D to B
B) B to D
C) C to A
D) A to C

Question 64

(Figure: Generalized Exchange Rate Model) In the figure, movement from _____ occurs if inflation increases in the U.S.

A) D to B
B) B to D
C) C to A
D) A to C

Question 65

When supply decreases while demand of a domestic currency simultaneously increases, that currency tends to:

A) stabilize.
B) equal out.
C) appreciate.
D) depreciate.

Question 66

(Figure: Generalized Exchange Rate Model) In the figure, if the domestic currency is at point D, its supply increases, and demand decreases, the domestic currency will move to point:

A) A.
B) B.
C) C.
D) D.

Question 67

(Figure: Generalized Exchange Rate Model) In the figure, if the domestic currency is at point B, its supply decreases, and demand increases, the domestic currency will move to point:

A) A.
B) B.
C) C.
D) D.

Question 68

(Figure: Generalized Exchange Rate Model) In the figure, if the yen is the domestic currency and interest rates fall in Japan, the yen will move from point D to point:

A) A.
B) B.
C) C.
D) D.

Question 69

(Figure: Generalized Exchange Rate Model) In the figure, if the yen is the domestic currency and interest rates rise in Japan, the yen will move from point B to point:

A) A.
B) B.
C) C.
D) D.

Question 70

When exchange rates are expressed as their reciprocals, _____ reversed.

A) the numerator and denominator are
B) supply and demand are
C) currency risk is
D) equilibrium is

Question 71

When the numerator and denominator in a currency pair are reversed, the exchange rate is expressed:

A) in terms of currency risk.
B) with the dollar first.
C) at equilibrium.
D) as its reciprocal.

Question 72

To calculate payments in an alternative currency:

A) divide the domestic currency by the foreign currency.
B) multiply the currency being swapped by the exchange rate or its reciprocal.
C) multiply the domestic currency by the foreign currency.
D) multiply the numerator by the denominator.

Question 73

Mandy is visiting Japan and wants to purchase a pair of earrings. They are priced at 14,000 yen, and one U.S dollar is equal to 111 yen. If Mandy converts her U.S. dollars into yen, she will need about ____ dollars to pay for the earrings.

A) $111
B) $126
C) $140
D) $1,554

Question 74

Gunther is visiting Japan and wants to purchase a set of Japanese knives. They are priced at 24,000 yen, and one euro is equal to 129 yen. If Gunther converts his euros into yen, he will need about ____ euros to pay for the knives.

A) 129
B) 186
C) 240
D) 3,000,000

Question 75

Aimi is visiting the United States and wants to purchase some Indian pottery from Arizona. The pottery is priced at $36.00. If $1 is equal to ¥111, Aimi will need about:

A) ¥0.32.
B) ¥3,360.
C) ¥4,000.
D) ¥4,360.

Question 76

Gaspard is visiting the United States, and his hotel bill for one week is $1,500. The hotel insists on being paid in U.S. dollars. Gaspard will need to convert _____ euros into dollars to pay the bill because €1 equals $1.16.

A) 116
B) 1,116
C) 1,291
D) 1,740

Question 77

Aaron is visiting Europe and wishes to take a tour of southern Italy for €2,000. If the exchange rate is USD/EUR .86, Aaron will need to exchange about _____ dollars for euros to pay for the tour.

A) 1,720
B) 2,000
C) 2,172
D) 2,325

Question 78

Assume that EUR/USD 1.16. A $36 shirt would cost _____ euros, and a €20 hat would be _____ dollars.

A) 31; 23
B) 23; 31
C) 42; 17
D) 136; 149

Question 79

Assume that EUR/YEN 129. A ¥6,470 shirt would cost about _____ euros, and a €20 hat would be about _____ yen.

A) 50; 2,580
B) 2,580; 50
C) 26; 3,328
D) 3,328; 26

Question 80

Assume that USD/YEN 111. A ¥6,470 shirt would cost about _____ dollars, and a $30 hat would be about _____ yen.

A) 3,350; 58
B) 58; 3,350
C) 7,180; 33
D) 33; 7,180