Changes in demand and supply for a currency Pt 2

What is the concept used to describe the level of inflation of one country in comparison to another country?

• Purchasing power parity theory

• Interest rates

• Growth rate

• Relative inflation

Assuming the inflation rate for Iran is 22%/year and for Uzbekistan is 15%/year, what would be the effect of an increase in Uzbekistan's inflation rate to 20%/year on the value of the Uzbekistani so'm (лв) in terms of the Iranian rial (IRR)?

• Appreciation

• Depreciation

• No change

• Stability

What could lead to an increase in the demand for a country's currency?

• Decrease in GDP growth rate

• Increase in relative interest rates

• Decrease in relative inflation

• Decrease in interest rates

How can a country control inflation levels?

• Decreasing relative growth rate

• Decreasing interest rates

• Increasing interest rates

• Increasing relative inflation

What is a sign of a strong economy in relation to the exchange rate?

• Highly valued currency

• Low levels of GDP growth

• Decreased demand for the currency

• Decreased interest rates

What is a key factor that affects the value of a currency through government activity?

• Central bank intervention

• Relative inflation

• Balance of trade

• Purchasing power parity theory

What action would a country take to lower the value of its currency in the foreign exchange market?

• Buy their own currencies back with the currency reserves in euros or dollars

• Decrease the supply of their own currencies

• Increase the supply of their own currencies

• Buy foreign currencies with their own currencies

What would be the effect of a strong currency on exports and imports?

• Make exports cheaper and imports more expensive

• No effect on exports and imports

• Increase the demand for exports and imports

• Make exports more expensive and imports cheaper

What is a determinant of aggregate demand that can be influenced by a strong currency?

• Balance of trade

• Interest rates

• Relative inflation

• GDP growth rate

What is the theory that suggests that relative prices are the only reason why exchange rates will change?

• Relative growth rate theory

• Purchasing power parity theory

• Central bank intervention theory

• Interest rate parity theory