Question 1

Forward market in foreign exchange refers to ________________ market.

Accepted Answer

Forward markets in foreign exchange involve contracts for the exchange of currencies at a future date, thus covering both short and long-term transactions.

Question 2

________________ is not a detect of flexible exchange rate.

Accepted Answer

Stability in the international monetary system is not a defect of a flexible exchange rate; rather, it is often considered a benefit. Flexible exchange rates can adjust to economic conditions, potentially leading to more stability.

Question 3

The function of foreign exchange market that helps in clearing international transactions is known as ________________.

Accepted Answer

The transfer function of the foreign exchange market facilitates the clearing of international transactions by allowing money to be moved from one country to another, thereby enabling the settlement of international trade and financial transactions.

Question 4

When the demand curve for foreign currency, intersects the supply curve, we get ________________ exchange rate.

Accepted Answer

The point where the demand curve for foreign currency intersects the supply curve is where the market is in balance, and this point determines the equilibrium exchange rate. This rate reflects the price at which the quantity of the currency demanded equals the quantity supplied.

Question 5

________________ of goods results in demand for foreign currency.

Accepted Answer

Importing goods requires purchasing foreign currency to pay for those goods, thus increasing the demand for foreign currency.

Quiz 1: International Trade and Economic Theory

Forward market in foreign exchange refers to ________________ market.

________________ is not a detect of flexible exchange rate.

The function of foreign exchange market that helps in clearing international transactions is known as ________________.

When the demand curve for foreign currency, intersects the supply curve, we get ________________ exchange rate.

________________ of goods results in demand for foreign currency.