Economics - Exchange rates

What is hot money?

• liquid assets which are seeking out the highest rates of return throughout the world

• fixed assets which are seeking out the highest rates of return throughout the world

• liquid assets which are seeking out the lowest rates of return throughout the world

• assets which are seeking out the highest qualitative rates of interest

Draw the J curve, label the diagram correctly.

Borrowing money in one economy where interest rates are low, and selling that currency to purchase another which yields a higher interest rate.

• Carry trade

• Hot money flow

• Devaluation of the US Dollar

• Depreciation of a currency

Borrowing money in one economy where interest rates are low, and selling that currency to purchase another which yields a higher interest rate.

• Carry trade

• Hot money flow

• Devaluation of the US Dollar

• Depreciation of a currency

A fall in the value of a currency is called...?

Revaluation is?

• a fall in the value of a currency

• a decrease in the rate at which a currency is traded against another as fixed by the central bank

• an increase in the rate at which a currency is traded against another as fixed by the central bank

• a pre-determined exchange rate which is not allowed to vary through central bank intervention

An increase in the rate at which a currency is traded against another, is?

• Evaluation

• Appreciation

• Devaluation

• Managed valuation

A pre-determined band in which a currency can float. However, if it is in danger of breaching the floor or ceiling, the central bank will intervene:

• Freely floating exchange rate

• Semi-fixed exchange rate

• Fixed exchange rate

• Managed exchange rate

Freely floating exchange rate is?

• exchange rate determined by the market place and interaction of demand and supply

• pre-determined band in which a currency can float

• a pre-determined exchange rate which is not allowed to vary through central bank intervention

• a pre-determined exchange rate which is allowed to vary through central bank intervention.