Question 1

The market forces influencing the exchange rate are not fully operational under&#10;A)floating exchange rate system&#10;B)speculative attack on the market&#10;C)fixed exchange rate system&#10;D)current regulations of IMF

Accepted Answer

Under a fixed exchange rate system, the government or central bank pegs the national currency's value to a foreign currency or a basket of currencies. Market forces of supply and demand are not allowed to freely determine the exchange rate; instead, the central bank intervenes to maintain the pegged rate.

Question 2

According managed to classification by IMF, the currency system of India falls under&#10;A)Managed flating&#10;B)independently floating&#10;C)crawling peg&#10;D)pegged to basket of currencies

Accepted Answer

India follows a managed floating exchange rate system, where the value of the rupee is determined by market forces (supply and demand), but the Reserve Bank of India intervenes occasionally to stabilize the currency or to steer it towards desired levels.

Question 3

Under fixed exchange rate system, the currency rate in the market is maintained through&#10;A)official intervention&#10;B)rationing of foreign exchange&#10;C)centralising all foreign exchange operations with central bank of the country&#10;D)none of the above

Accepted Answer

Official intervention by a country's central bank is the primary method used to maintain a fixed exchange rate system. This involves buying or selling the country's currency on the foreign exchange market to keep its value stable against the currency it is pegged to.

Question 4

Euro was launched on&#10;A)1999&#10;B)2000&#10;C)2002&#10;D)2004

Accepted Answer

The Euro was officially launched on January 1, 1999, for electronic transactions and financial markets. Physical euro banknotes and coins were introduced on January 1, 2002.

Question 5

Indirect rate of exchange is quoted in India for -&#10;A)sale of foreign travellers cheque&#10;B)sale of rupee travellers cheques&#10;C)purchase of personal cheques&#10;D)none of the above

Accepted Answer

Indirect rate of exchange in India does not apply to any of the options provided (A, B, C). It typically refers to how many units of the foreign currency you can get for one unit of the domestic currency, but none of the options directly relate to this concept.

Question 6

The buying rate is also known as the&#10;A)bid rate&#10;B)offer rate&#10;C)spread&#10;D)swap

Accepted Answer

The buying rate, in the context of foreign exchange, is referred to as the bid rate. This is the rate at which the bank or the currency exchange dealer is willing to buy a foreign currency.

Deck 7: Exchange Rate and Currency Systems: Understanding Market Forces and Transaction Types