In a fixed exchange rate regime, the government Select one: a. establishes capital controls. b. establishes exchange rate controls. c. buys and sells currency through the central bank. d. expands the money supply.
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- Q2-5 In the monetary approach to the balance of payments (under flexible exchange rates) an increase in the proportion of income that people in country A wish to hold as money would, other things equal, lead to _______ in country A's demand for money and to ______ of A's currency in the foreign exchange markets. a. an increase / a depreciation b. an increase / an appreciation c. a decrease / a depreciation d. a decrease / an appreciationIn a floating exchange rate system: Question 15 options: The Balance of payments will always equal the government budget The Balance of Payments should always be in surplus The government intervenes to influence the exchange rate The exchange rate should adjust to equate the supply and demand of the currencyTitle: Identification Things to do: 1. A second function of the foreign exchange market is to provide exchange possibility that unpredicted changes future exchange rates adverse consequences for the firm. insurance against risk, which is the in will have exchange rate is the rate foreign exchange dealer 2. The at which a converts currency into another one currency on a particular day. 3. The value of a is determined by the interaction between the demand and supply of that currency relative to the demand and supply of other currencies. 4. A parties agree exchange occurs to exchange currency when two and execute the deal at some specific date in the future. 5. rates governing such future transactions are referred to as forward exchange rates. 6. Changes in be problematic for an business. exchange rates can international 7. A is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. 8. When a firm enters into a it is taking out possibility…
- Q3-8 When a nation chooses to fix or float its currency exchange rate, it should consider Select one: a. only its domestic banks, importers, and exports. b. only whether it has a great deal of economic integration. c. only whether it has similar circumstances in terms of demand or supply shocks with its trading partners. d. both the level of economic integration and the similarity of demand or supply shocks.Consider the strategies used by your government, in the country your currently reside and currentmanagement of the exchange rate.Now record, in your journal, your response to the following questions, in 700 words or less: How is the exchange rate policy in your own jurisdiction managed by government? What, in your opinion, are the strengths and weaknesses of your government’s policies? Identify one MNC that may, or may not, benefit from the operation of your nationalexchange rate policy and justify your position.As exchange rates change, the rates A. all of these options are true. B. change the relative purchasing power between countries. C. can affect imports and exports between those two countries. D. will affect the flow of funds between the countries.
- Write True if the statement is correct and write False if the statement is incorrect. 1). The foreign exchange market is a market for converting the currency of one country into that of another country. An exchange 2). rate is simply the rate at which one currency is converted into another. 3). The rate at which one currency is converted into another can change over time. 4). The foreign exchange market serves to convert the currency of one country into the currency of another. 5). The foreign exchange market serves to provide some insurance against foreign exchange risk, by which we mean the adverse consequences of unpredictable changes in exchange rates. 6). When a tourist changes one currency into another, she is participating in the foreign exchange market. 7). To home country, the company use those funds in its must convert them to its home country's currency. 8). Currency speculation is another use of foreign exchange markets. 9). International businesses use foreign exchange…Why do governments intervene in the foreign exchange market? Check all that apply: To maintain exchange rate boundaries To reduce fear in financial markets To smooth out the business cycle To smooth out exchange rate movements To earn a profit for the governmentQuestion 4 There are two main functions of foreign exchange market; to convert the currency of one country into the currency of another, and to provide some insurance against foreign exchange risk. a. Define foreign exchange risk and explain the differences between spot exchange rates, forward exchange rates, and currency swap in order to insure against foreign exchange risk.
- Q2-5a. 5. Some remedies and preventive measures have been put forth to slow or forestall currency crises, such as capital controls and intermediate regimes (i.e., fixed or floating exchange rates). What are these measures?1.One proposal to stabilize the international monetary system involves setting exchange rates at their purchasing power parity rates. Once exchange rates are correctly aligned (according to PPP), each nation would adjust its monetary policy so as to maintain them. What problems might arise from using the PPP rate as a guide to the equilibrium exchange rate?Match each term in Column A with its related definition in Column B.Column A1. Spot rate2. Currency appreciation3. Translation risk4. Transaction risk5. Exchange rateColumn Ba. The rate at which one currency can be traded for another currency.b. The possibility that future cash transactions will be affected by changing exchange rates.c. A month ago, $1 U.S. was worth 8.5 Mexican pesos. Today, $1 is worth 9.0 Mexicanpesos. The U.S. dollar has undergone what?d. The degree to which a firm’s financial statements are exposed to exchange ratefluctuation.e. The exchange rate of one currency for another for immediate delivery (today).
