Currency and International Business Flashcard

Front

What is the definition of exchange rates?

Back

The value of one currency in relation to another currency.

Front

What are currency fluctuations? Changes in the value of one currency relative to ___

Back

another currency over a period of time.

Front

What are foreign exchange markets?

Back

Decentralized markets for buying and selling currencies

Front

What is currency risk management?

Back

Strategies and techniques to mitigate the impact of exchange rate fluctuations on financial transactions or investments.

Front

How does currency devaluation impact international business?

Back

It can make exports cheaper and imports more expensive, leading to changes in demand for domestic and foreign products.

Front

Which of the following is NOT a factor affecting exchange rates?
The color of the sky,
Political stability,
Inflation,
Interest rates

Back

The color of the sky

Front

What is the main purpose of foreign exchange markets?

Back

Facilitate the exchange of one currency for another

Front

How can an international company protect itself against currency changes? Options: Hedging (the use of futures, options, and/or currency-hedged funds), Diversification globally and investing in countries with conservative currency management, Transacting in your own currency, e.g. demand payment in US$

Back

All of the above

Front

What is positive about your currency suddenly weakening? Your exports become cheaper, Demand for your commodities may rise, It may help government correct balance of payment imbalances

Back

All of the above

Front

What are the potential negative/s of currency devaluation for businesses? Weakening purchasing power, Less profits (if you are owned by an overseas company), Rising cost of imported materials

Back

Weakening purchasing power, Less profits (if you are owned by an overseas company), Rising cost of imported materials