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TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
94. The supply schedule of pesos has a negative-sloping region corresponding to the inelastic region on the Mexican
demand schedule for foreign currency.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
95. If the Swiss demand for dollars is elastic, a depreciation of the dollar against the franc will lead to a greater quantity of
francs being supplied to the foreign exchange market to obtain dollars.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
96. If the Swiss demand for dollars is inelastic, an appreciation of the dollar against the franc will lead to a greater
quantity of francs being supplied to the foreign exchange market to obtain dollars.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
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Page 42
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
97. If the Swiss demand for dollars is elastic, an appreciation of the dollar against the franc will lead to a greater quantity
of francs being supplied to the foreign exchange market to obtain dollars.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
98. If the Swiss demand for dollars is inelastic, a depreciation of the dollar against the franc will lead to a greater quantity
of francs being supplied to the foreign exchange market to obtain dollars.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
99. Movements along the demand schedule for pounds are caused by changes in the pound’s exchange rate.
a.
True
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Page 43
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
100. Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, an
increase in the demand schedule causes an appreciation of the dollar against the pound.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
101. Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, a
decrease in the demand schedule causes an appreciation of the dollar against the pound.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
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DATE MODIFIED:
6/22/2016 3:23 PM
102. Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, an
increase in the supply schedule causes an appreciation of the dollar against the pound.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
103. Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, a
decrease in the supply schedule causes an appreciation of the dollar against the pound.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
104. The trade-weighted dollar is the weighted average of the exchange rates between the dollar and the most important
industrial-country trading partners of the United States.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
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Page 45
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Indexes of the Foreign-Exchange Value of the Dollar: Nominal and Real Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
105. If the trade-weighted dollar moves from an index value to 100 to 110, the dollar depreciates by 10 percent against the
trade-weighted averages of the exchange rates of the major trading partners of the United States.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Indexes of the Foreign-Exchange Value of the Dollar: Nominal and Real Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
106. An increase in the trade-weighted value of the dollar indicates a dollar appreciation relative to the currencies of its
major trading partners and a worsening of U.S. international competitiveness.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Indexes of the Foreign-Exchange Value of the Dollar: Nominal and Real Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
107. With arbitrage, a trader attempts to purchase a foreign currency at a low price and, at a later date, resell the currency
at a higher price in order to make a profit.
a.
True
b.
False
ANSWER:
False
POINTS:
1
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Page 46
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Arbitrage
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
108. Arbitrage results in a riskless profit since a trader purchases a currency at a low price and simultaneously resells it at
a higher price.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Arbitrage
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
109. If the exchange rate is $0.01 per yen in New York and $0.015 per yen in Tokyo, an arbitrager could profit by buying
yen in Tokyo and simultaneously sell them in New York.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Arbitrage
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
110. Currency arbitrage tends to result in identical yen/dollar exchange rates in New York and in Tokyo.
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a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Arbitrage
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
111. In the forward market, the exchange rate is agreed on at the time of the currency contract, but payment is not made
until the future delivery of the currency actually takes place.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
112. If the spot price of the Swiss franc is $0.4020 and the 90-day forward franc sells for $0.4026, the franc is at a 90-day
forward discount of $0.0006, or at a 0.2 percent forward discount per annum against the dollar.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Understand
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DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
113. Suppose that Sears owes 1 million yen to a Japanese electronics manufacturer in 3 months. It could hedge against the
risk of a depreciation of the dollar against the yen by contracting to purchase 1 million yen in the forward market, at
today’s forward rate, for delivery in 3 months.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
114. Assume that Boeing anticipates receiving 20 million yen in 3 months from exports of jumbo jets to a Japanese
airline. The firm could hedge against the risk of a depreciation of the dollar against the yen by contracting to sell its
expected yen proceeds for dollars in the forward market at today’s forward rate.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
115. A U.S. investor’s extra rate of return on an investment in France, as compared to the United States, equals the
interest-rate differential adjusted for any change in the dollar/franc exchange rate.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
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Page 49
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interest Arbitrage, Currency Risk, and Hedging
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
116. A currency speculator’s goal is to buy a currency at a low price and immediately resell it at a higher price, thus
realizing a riskless profit.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign-Exchange Market Speculation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
117. Stabilizing speculation reinforces market forces by intensifying an appreciation or a depreciation in a currency’s
exchange value.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign-Exchange Market Speculation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
118. What foreign exchange transactions do banks typically engage in?
ANSWER:
Banks typically engage in spot, forward, and swap transactions.
POINTS:
1
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Page 50
DIFFICULTY:
Easy
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign-Exchange Market
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
119. How is the equilibrium rate of exchange determined?
ANSWER:
The equilibrium rate of exchange in a free market is determined by the intersection of the
supply and demand schedules of foreign exchange.
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
120. Is it possible to trade foreign exchange in the futures market? How does such trading differ from the forward market?
ANSWER:
Yes. In the futures market, contracting parties agree to future exchanges of currencies and set
applicable exchange rates in advance. The futures market is distinguished from the forward
market in that only a limited number of leading currencies are traded; moreover, trading takes
place in a standardized contract amount and in a specific geographic location.
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Essay
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
121. Where are foreign currency options traded?
ANSWER:
Foreign-currency options are traded in a variety of currencies in Europe and the United States.
The bank market for foreign-currency options consists of large U.S. banks that write options
for their corporate customers. In addition, the Amsterdam, Montreal, and Philadelphia
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Page 51
exchanges provide centralized trading floors devoted to foreign-currency-option trading.
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Essay
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currency Options
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
122. The nominal exchange rate is the
a.
b.
c.
d.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Indexes of the Foreign Exchange Value of the Dollar: Nominal and Real Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 7:34 AM
DATE MODIFIED:
7/5/2016 7:36 AM
123. The real exchange rate differs from the nominal exchange rate in that the real exchange rate
a.
does not account for the purchasing power of the currency
b.
adjusts the nominal exchange rate for interest rate differentials among countries
c.
is fixed while the nominal exchange rate is flexible
d.
embodies the changes in price levels of countries in its calculation
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Indexes of the Foreign Exchange Value of the Dollar: Nominal and Real Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 7:36 AM
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Page 52
DATE MODIFIED:
7/5/2016 7:41 AM
124. When the real exchange rate of Japan’s yen appreciates
a.
the yen’s nominal exchange rate must remain constant
b.
the yen’s nominal exchange rate must also appreciate
c.
the yen’s nominal exchange rate must depreciate
d.
none of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Indexes of the Foreign Exchange Value of the Dollar: Nominal and Real Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 7:42 AM
DATE MODIFIED:
7/7/2016 4:17 AM
125. When the real exchange rate of the Japanese yen depreciates
a.
the yen’s nominal exchange rate must also depreciate
b.
the yen’s nominal exchange rate must remain constant
c.
the yen will trade for more units of a foreign currency
d.
the yen will trade for fewer units of a foreign currency
ANSWER:
d
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign Exchange Quotations
KEYWORDS:
BLOOM’S: Apply
DATE CREATED:
7/5/2016 7:44 AM
DATE MODIFIED:
7/5/2016 7:45 AM
126. Concerning the foreign exchange market, which of the following is false?
a.
most foreign exchange transactions involve the transfer of electronic balances between commercial banks or
foreign exchange dealers
b.
the worldwide amount of foreign exchange transactions is about $4 trillion a day
c.
unlike the stock or commodity exchanges, the foreign exchange market is not an organized structure
d.
virtually all foreign exchange trading occurs among banks located in New York City
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
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Page 53
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Exchange Market
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 7:46 AM
DATE MODIFIED:
7/5/2016 7:48 AM
127. Concerning the foreign exchange market, which of the following is false?
a.
virtually all foreign exchange trading takes place in London and Zurich
b.
foreign exchange trading is dominated by the dollar, euro, yen, and pound
c.
individual households, businesses, governments, and banks buy and sell foreign currencies and other debt
instruments
d.
the foreign exchange market has no centralized meeting place and no formal requirements for participation
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Exchange Market
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 7:48 AM
DATE MODIFIED:
7/5/2016 7:50 AM
128. All of the following are main centers for foreign exchange trading except
a.
Tokyo
b.
London
c.
Edmonton
d.
New York
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Exchange Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 7:50 AM
DATE MODIFIED:
7/5/2016 7:53 AM
129. Throughout the foreign exchange market, trading in currencies
a.
occurs at any hour of the day or night
b.
occurs at prices established by the U.S. and British governments
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Page 54
c.
is conducted on centralized trading floors in Paris and Hong Kong
d.
is restricted to the hours between 1 P.M and 3 P.M., Eastern Time Zone
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 7:53 AM
DATE MODIFIED:
7/5/2016 7:55 AM
130. Concerning the spot market for foreign exchange transactions
a.
currencies are bought and sold for delivery at a particular date in the future
b.
currencies are traded for immediate delivery
c.
currency exchange rates are set by government regulatory agencies
d.
currency exchange rates are set by central banks
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 7:56 AM
DATE MODIFIED:
7/5/2016 7:57 AM
131. The soaring (appreciating) value of the trade-weighted dollar in the early 1980s
a.
was caused by relatively low interest rates in the United States
b.
decreased the international competitiveness of American exporters
c.
resulted in Americans importing fewer goods and services
d.
increased the demand for American exports of goods and services
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Indexes of the Foreign Exchange Value of the Dollar: Nominal and Real Exchange Rates
KEYWORDS:
BLOOM’S: Understand
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Page 55
DATE CREATED:
7/5/2016 7:57 AM
DATE MODIFIED:
7/5/2016 7:59 AM
132. Concerning foreign exchange trading, bank purchases from and sales to their customers are classified as retail
transactions when the amount involved
a.
is less than 100,000 units of currency
b.
less than 500,000 units of currency
c.
less than 1 million units of currency
d.
greater than 1 million units of currency
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 7:59 AM
DATE MODIFIED:
7/5/2016 8:01 AM
133. Concerning foreign exchange trading, wholesale transactions involving more than 1 million currency units generally
a.
occur between banks or with large corporate customers
b.
occur only in Hong Kong and Frankfurt
c.
are limited to transactions in the spot market
d.
are limited to transactions in the forward market
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 8:01 AM
DATE MODIFIED:
7/5/2016 8:03 AM
134. In recent years, major international banks that trade in the foreign exchange market have included
a.
Deutsche Bank
b.
Citigroup
c.
Barclays
d.
all of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
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Page 56
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 8:03 AM
DATE MODIFIED:
7/5/2016 8:04 AM
135. In recent years, the largest amount of foreign-exchange trading has involved
a.
foreign-exchange swaps and spot transactions
b.
spot transactions and forward transactions
c.
forward transactions and foreign-exchange swaps
d.
foreign-exchange options and spot transactions
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Types of Foreign Exchange Transactions
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 8:05 AM
DATE MODIFIED:
7/5/2016 8:06 AM
136. In recent years, the smallest amount of foreign-exchange trading has involved
a.
spot transactions
b.
forward transactions
c.
foreign-exchange options
d.
foreign-exchange swaps
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Types of Foreign Exchange Transactions
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 8:06 AM
DATE MODIFIED:
7/5/2016 8:08 AM
137. Concerning foreign exchange trading, a forward contract is characterized by
a.
it issued by major commercial banks such as Bank of America
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Page 57
b.
its contract size can be tailored to the needs of the exporter, importer, and so on
c.
its date of delivery is negotiable
d.
all of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 8:08 AM
DATE MODIFIED:
7/5/2016 8:10 AM
138. Concerning foreign exchange trading, a “forward contract”
a.
has a definite expiration date at which settlement must occur
b.
has contract costs based on the bid-offer spread
c.
is issued by a major commercial bank, like Citibank or Barclays
d.
all of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 8:10 AM
DATE MODIFIED:
7/5/2016 8:12 AM
139. Concerning foreign exchange trading, a “futures contract” is characterized by
a.
the size of the contract is standardized in round lots
b.
the contract’s costs are based on brokerage fees for sell and buy orders
c.
trading futures contracts occurs on the market floor of the International Monetary Market
d.
all of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
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Page 58
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 8:12 AM
DATE MODIFIED:
7/5/2016 8:14 AM
140. A call option provides an options holder
a.
the obligation to buy foreign currency at a specific price
b.
the obligation to sell foreign currency at a specific price
c.
the right to buy foreign currency at a specific price
d.
the right to sell foreign currency at a specific price
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Foreign Currency Options
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 8:14 AM
DATE MODIFIED:
7/5/2016 8:16 AM
141. A put option provides an options holder
a.
the obligation to buy foreign currency at a specific price
b.
the obligation to sell foreign currency at a specific price
c.
the right to buy foreign currency at a specific price
d.
the right to sell foreign currency at a specific price
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Foreign Currency Options
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 8:16 AM
DATE MODIFIED:
7/5/2016 8:18 AM
142. The ______ is the price at which a foreign currency option can be exercised—that is, the price at which the foreign
currency is bought or sold
a.
strike price
b.
terms of trade
c.
rate of exchange
d.
exercise price
ANSWER:
a
POINTS:
1
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Page 59
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Foreign Currency Options
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 8:19 AM
DATE MODIFIED:
7/5/2016 8:21 AM
143. The demand for foreign exchange results from transactions that appear on the
a.
credit side of a country’s balance of payments statement
b.
debit side of a country’s balance of payments statement
c.
both the credit side and the debit side of a country’s balance of payments statement
d.
neither the credit side nor the debit side of a country balance of payments statement
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Exchange Rate Determination
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 8:21 AM
DATE MODIFIED:
7/5/2016 8:23 AM
144. The supply for foreign exchange results from transactions that appear on the
a.
credit side of a country’s balance of payments statement
b.
debit side of a country’s balance of payments statement
c.
both the credit side and the debit side of a country’s balance of payments statement
d.
neither the credit side nor the debit side of a country balance of payments statement
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Monetary and fiscal policy
TOPICS:
Exchange Rate Determination
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 8:23 AM
DATE MODIFIED:
7/5/2016 8:25 AM
The next 5 questions refer to the table below that shows the supply and demand schedules of British pounds.
Exchange Rate:
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Page 60
Quantity of Pounds Supplied Dollars Per Pound Quantity of Pounds Demanded
100 $2.50 20
80 2.00 40
60 1.50 60
40 1.00 80
20 0.50 100
145. In the table above, the equilibrium exchange rate is shown as
a.
$2.50 per pound
b.
$2.00 per pound
c.
$1.50 per pound
d.
$1.00 per pound
ANSWER:
c
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Preface 1
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Supply and demand
TOPICS:
Exchange Rate Determination
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
7/5/2016 8:28 AM
DATE MODIFIED:
7/5/2016 8:31 AM
146. In the table above, if the exchange rate is equal to $2.00 per pound, there is a ______ and the exchange rate
will______.
a.
surplus of pounds, decrease
b.
surplus of pounds, increase
c.
shortage of pounds, decrease
d.
shortage of pounds, increase
ANSWER:
a
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Preface 1
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Supply and demand
TOPICS:
Exchange Rate Determination
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
7/5/2016 8:34 AM
DATE MODIFIED:
7/7/2016 4:25 AM
147. In the table above, if the exchange rate is equal to $1.00 per pound, there is a ______ and the exchange rate
will______