Deck 13: Understanding Foreign Exchange Market and Exchange Rate Systems: Part 2

Question 1

In a system of managed float there is less chance of speculation.

A)flexible
B)managed float
C)fixed
D)restictive

Answer 1

managed float

Question 2

    -------is done to overcome uncertainties.

A)Arbitrage
B)Hedging
C)speculation
D)locking

Answer 2

Hedging

Question 3

-------is the opposite of hedging.

A)Arbitrage
B)locking
C)speculation
D)blocking

Answer 3

speculation

Question 4

The modern foreign exchange market functions in a system of -------.

A)Fixed exchange rate
B)Gold standard
C)Britton Wood system
D)Floating exchange rate

Question 5

Pick out the feature which is not true of the foreign exchange market.

A)Buying and selling of currencies
B)Largest market
C)High liquidity
D)Existence of a central market place

Question 6

In the determination of the exchange value of a currency, the first currency of a currency pair is called -------.

A)Price currency
B)Hard currency
C)Base currency
D)bitcoin

Question 7

The currency used for international transactions irrespective of the importing or exporting country's currency is called -------.

A)Soft currency
B)Bitcoin
C)Vehicle currency
D)value currency

Question 8

Pick out the feature which is not true of the foreign exchange market.

A)It is open 24 hours a day
B)Not one single entity can control the market
C)Huge market
D)It has limited geographical dispersion

Question 9

-------enables an investor to earn high returns while minimizing capital risks.

A)Liquidity
B)Reserves
C)Returns
D)Leverage

Question 10

Trading in foreign exchange has become fast and simple due to -------.

A)Simple procedures
B)Geographical proximity
C)Improved technology
D)Bullet trains

Question 11

Pick out the feature which is not true of the foreign exchange market.

A)Huge trading volumes
B)Operates throughout the week
C)Presence of a risk element
D)Leverage enables to make profit

Question 12

The provision of foreign bills of exchange in international payments in an example of -------.

A)Transfer function
B)Credit function
C)Speculation
D)None of the above

Question 13

Transaction where the exchange of currencies take place on the same date is known as

A)swap transaction
B)ready transaction
C)spot transaction
D)value tomorrow

Question 14

Transaction in which exchange of currencies take place at a specified future date, subsequent to spot date is known as,

A)swap transaction
B)forward transaction
C)future transaction
D)non-deliverable forwards

Question 15

Transaction in which currencies to be exchanged the next day of the transaction is known as

A)value today
B)ready transaction
C)spot transaction
D)value tomorrow

Question 16

According to the Purchasing Power Parity theory, the rate of exchange between the currencies of two countries is determined by-------                      

A)their relative price levels
B)their import and export volumes
C)their import and export values
D)their relative capital movements

Question 17

Which of the following is not an assumption of the Purchasing Power Parity theory? -------                      

A)There are no trade barriers between countries
B)The price index for each of the two countries must be comprised of the same basket of goods
C)All the prices should be indexed to the same year
D)Changes in the exchange rate changes internal price level

Question 18

Exchange rate between two currencies is based on -------

A)purchasing power of two currencies
B)economic development of the two nation
C)political stability in the two countries
D)export - import in two countries

Question 19

Purchasing Power Parity Theory considers that goods in different countries are -------         

A)differential
B)identical
C)superior
D)inferior

Question 20

Under IMF, the exchange rate system was     -------                 

A)gold standard
B)currency board system
C)dollarization
D)EURO

Question 21

Under managed float, the central bank of a nation intervenes to-------foreign currency.

A)only purchase
B)only sell
C)purchase and sell
D)auction

Question 22

Flexible exchange rate system, the exchange rate is determined by -------     

A)Market forces
B)Central Bank
C)commercial bank
D)Scheduled Bank

Question 23

India has adipted -------Exchange rate system.

A)Fixed
B)Flexible
C)Managed
D)Stable