exchange rate

What is the foreign exchange rate?

• The interest rate set by the central bank

• The price of a currency in the domestic market

• The tax rate on foreign transactions

• The value of a currency expressed in terms of another currency

What causes the foreign exchange rate to fall?

• Government intervention

• Increased supply and decreased demand

• Decreased supply and increased demand

• Stable demand and supply

How does inflation affect the value of goods and services?

• High inflation causes the prices of goods and services to increase

• High inflation causes the prices of goods and services to decrease

• Inflation has no impact on the prices of goods and services

• Inflation stabilizes the prices of goods and services

What is the impact of changes in interest rates on the exchange rate?

• Interest rates affect the value of the currency

• Interest rates have no influence on the exchange rate

• Increasing interest rates result in a lower exchange rate

• Increasing interest rates result in a higher exchange rate

What is the role of FDI/MNCs in influencing the exchange rate?

• Outward FDI increases demand for a currency

• Inward FDI decreases demand for a currency

• Outward FDI decreases demand for a currency

• Inward FDI increases demand for a currency

How does speculation impact the stock market?

• Speculation boosts stock prices

• Speculation has no effect on stock prices

• Speculation can cause stock market fluctuations

• Speculation leads to market volatility

What happens to the price of imported goods and exported goods when the value of the local currency decreases in comparison to foreign currencies?

• Both imported goods and exported goods become cheaper

• Both imported goods and exported goods become more expensive

• Imported goods become cheaper and exported goods become more expensive

• Imported goods become more expensive and exported goods become cheaper

How does a rise in the foreign exchange rate impact import prices?

• Import prices remain the same

• Import prices fall

• Import prices fluctuate

• Import prices rise

What is the advantage of a floating foreign exchange rate system?

• Insulation from external changes

• Automatic stabilization of balance of payments

• Certainty in currency value

• Need for high foreign reserves

What is a disadvantage of a floating exchange rate system?

• Lack of speculative movements

• Stability in investment decisions

• Uncertainty introduced by currency fluctuations

• Fixed exchange rates