BUS357 Week 3 Quiz

Question 1

If a company from one country decides to sell merchandise to a company from another country, ________.

it can use the OTC market to convert receipts in the future and the exchange markets to convert receipts in the spot market

Correct!

it can denominate the sale in either currency and use the foreign exchange market to convert currency

it will denominate the sale in the currency of the buyer since it is too hard for them to convert foreign currency

it will denominate the sale in its own currency since it is too hard to convert foreign currency

 

Question 2

Which of the following is a true statement about the IMF?

It requires countries with fixed exchange rates to have their currencies fluctuate within 2 percent of their par value.

It follows guidelines established by the Bank for International Settlements.

Correct!

It classifies currencies from the least to the most flexible.

It requires member countries to use a fixed exchange rate regime.

 

Question 3

A(n) ________ is the price of a currency.

subsidy

Correct!

exchange rate

quota

tariff

 

Question 4

A(n) ________ is the right but not the obligation to buy or sell a foreign currency within a certain time period or on a specific date at a specific exchange rate.

Correct!

option

offer

bid

forward rate

 

Question 5

According to purchasing power parity, if the domestic inflation rate is ________ than that in the foreign country, the domestic currency should be ________ than that of the foreign country.

higher; stronger

Correct!

lower; stronger

higher; higher

lower; weaker

 

Question 6

Which type of exchange rate allows a currency to float, but provides for intervention based on economic conditions?

Correct!

managed floating

crawling band

independently floating

pegged

 

Question 7

The top location for trading foreign exchange is ________.

Tokyo

Zurich

New York

Correct!

London

 

Question 8

A black market exists when ________.

a country is experiencing a recession

a country is running a budget surplus

Correct!

people are willing to pay more for hard currency than the official rate

a country produces only black currency

 

Question 9

________ is money denominated in the currency of another nation or group of nations.

A quota

A tariff

A subsidy

Correct!

Foreign exchange

 

Question 10

An example of an electronic brokerage system used to trade foreign exchange is ________.

the reporting dealers clearing house

the Bank for International Settlements

Interbank Traders Ltd.

Correct!

Reuters