foreign exchange market

What are two types of exchange rate transactions?

• Spot transaction

• Spot exchange rate

• Forward transaction

• Forward exchange rate

The foreign exchange market is organized as

• OTC market

• Physical market
• Online market
• Centralized market

What is traded in the Foreign Exchange Market?

• Gold
• Real Estate
• Currencies
• Stocks

________is simply an application of the law of one price to national price levels.

• Law of Demand
• Consumer Price Index
• Interest Rate Parity
• Purchasing Power Parity (PPP)

Housing, land, and services such as restaurant meals, haircuts, and golf lessons are not

• Consumer services
• traded/ trade-able goods

• Capital goods
• Consumer goods

One of the factors That Affect Exchange Rates in the Long Run

• Interest rates
• GDP growth rates
• Productivity

• Unemployment rates

Select goods that may have little direct effect on the exchange rate

• Imported goods and goods with high tariffs

• Perishable goods and goods with seasonal demand
• Non tradable goods

• Luxury goods and goods with elastic demand

In the short run, an exchange rate is the price of domestic bank deposits in terms of foreign bank deposits.

• True

• False

- To understand how exchange rates shift in time, we need to understand

• changes in the money supply and exchange rate overshooting.

• the factors that shift expected returns for domestic and foreign deposits

• factors explaining changes in exchange rate

An increase in the foreign interest rate i^F shifts the demand curve D to the right and causes the domestic currency to appreciate.

• True

• False