Question 1

------------------- system imposes a discipline an monetary authorities

Accepted Answer

A fixed exchange rate system imposes discipline on monetary authorities because it requires them to maintain exchange rates within a specific target or band, limiting their ability to adjust monetary policy freely.

Question 2

Speculation is not possible in the case of --------- system

Accepted Answer

In a fixed exchange rate system, the value of a currency is pegged to another currency or a basket of currencies, limiting the opportunity for speculation since the exchange rate does not fluctuate freely based on market conditions.

Question 3

Increased capital inflows increases ------------------

Accepted Answer

Increased capital inflows typically lead to an appreciation of the domestic currency as demand for the domestic currency rises when foreign investors convert their currency to invest in the domestic market.

Question 4

Political instability leads to ------------- in the value of that country's currency

Accepted Answer

Political instability often leads to a decrease in the value of a country's currency because it creates uncertainty about the country's future economic policies and stability, which can deter investment and reduce confidence among investors and the public.

Question 5

-------------- is a social factor that influence the exchange rate

Accepted Answer

The answer of -------------- is a social factor that influence...

Question 6

When exports increase, the supply of foreign currency -----------

Accepted Answer

When exports increase, it means that foreign buyers are purchasing more goods from the exporting country, which requires them to convert their currency into the currency of the exporting country. This process increases the supply of foreign currency in the exchange market.

Question 7

When imports increase, the supply of foreign currency -------------

Accepted Answer

The answer of When imports increase, the supply of foreign...

Question 8

Price index is considered in ---------------- theory of exchange rate determination

Accepted Answer

The Purchasing Power Parity (PPP) theory of exchange rate determination considers the price index as a crucial factor. It suggests that the exchange rate between two currencies will adjust to reflect changes in the price levels of the two countries.

Question 9

Capital outflows leads to increase in the ---------------

Accepted Answer

Capital outflows lead to an increase in the demand for foreign currencies as domestic investors convert their domestic currency to foreign currency to invest abroad.

Question 10

A deficit budget leads to ----------------

Accepted Answer

A deficit budget typically leads to a decrease in the value of the domestic currency because it often results in increased borrowing and potentially higher inflation, both of which can devalue the currency.

Question 11

Mint parity theory is suitable for ---------

Accepted Answer

Mint parity theory is suitable for the gold standard because it is based on the fixed exchange rates determined by the gold content of currencies, which is characteristic of the gold standard system.

Question 12

Forex reserves of a country are held by ---------------------

Accepted Answer

Forex reserves of a country are typically held by the central bank, which is responsible for managing the country's currency in foreign exchange markets and for maintaining the value of the national currency.

Question 13

Extending of economic activities across national boundaries is known as -------------

Accepted Answer

Globalization refers to the process of extending economic activities across national boundaries, leading to increased interconnectedness and interdependence of economies worldwide.

Question 14

The WTO is the successor to -------------

Accepted Answer

The World Trade Organization (WTO) succeeded the General Agreement on Tariffs and Trade (GATT) in 1995 to regulate international trade.

Question 15

Central bank is likely to set policies and procedures to keep the exchange rate ------------------

Accepted Answer

Central banks often aim to keep the exchange rate stable to ensure economic predictability and to avoid excessive inflation or deflation, which can be caused by volatile exchange rates.

Question 16

------------- of a country is the relation over a period between the values of her exports and the values of her imports

Accepted Answer

The Balance of Trade (BOT) is the correct term that describes the relationship over a period between the values of a country's exports and imports.

Question 17

Devaluation raised the domestic price of --------------

Accepted Answer

Devaluation of a currency makes imported goods more expensive in the domestic market, as more of the domestic currency is required to purchase the same amount of foreign goods.

Question 18

Devaluation reduces the foreign price of --------------

Accepted Answer

Devaluation of a country's currency makes its exports cheaper for foreign buyers, thus reducing the foreign price of exports.

Question 19

Under gold standard the value of the currency unit was defined in terms of -------------

Accepted Answer

Under the gold standard, the value of the currency unit was defined in terms of a certain quantity of gold.

Question 20

The ADB was set up in the year

Accepted Answer

The Asian Development Bank (ADB) was established in 1966.

Quiz 4: Global Economy: Exchange Rates, Monetary Policies, and Economic Strategies