Currency and Exchange Rates Quiz

Why are currencies vital for international trading?

• They have a stable value that does not fluctuate.

• They are only used for domestic trade.

• They are not necessary for purchases in foreign countries.

• Their fluctuating values impact international trade.

What is the importance of understanding exchange rates when traveling?

• Exchange rates do not fluctuate and remain constant.

• Exchange rates are only published in newspapers.

• It is important to keep checking exchange rates as they fluctuate daily.

• Exchange rates are irrelevant to travelers.

What does the term "appreciation" refer to in the context of currency value?

• A decrease in currency value, making it weaker.

• The process of exchanging one currency for another.

• A stable currency value that does not change.

• An increase in currency value, making it stronger.

What is an exchange rate?

• The process of exchanging one currency for another.

• The fixed value of a currency in relation to domestic trade.

• The value of a currency in relation to a foreign currency.

• A daily publication of currency values in newspapers.

What is the effect of a strong currency on a country's exports?

• It increases exports by making products cheaper abroad.

• It decreases exports by increasing the cost of products abroad.

• It has no effect on exports.

• It decreases the cost of exports and increases their volume.

What is depreciation in terms of currency?

• Increase in currency value.

• Decrease in currency value.

• Fixed exchange rate.

• Increase in foreign currency units per one unit of domestic currency.

What is the main purpose of the foreign exchange market?

• To facilitate the stock market trading.

• To assist in international trade by exchanging currencies.

• To set fixed exchange rates for all countries.

• To provide loans to developing countries.

What is the primary purpose of governments maintaining fixed exchange-rate systems?

• To allow currency values to fluctuate freely.

• To stabilize currency values.

• To eliminate the need for currency exchange.

• To promote rapid trade growth.

What was the main outcome of The Bretton Woods Conference?

• It established the European Union.

• It created a flexible exchange-rate system.

• It created a fixed exchange-rate system for the US and Western Europe.

• It abolished the International Monetary Fund (IMF).

How can nations correct a negative trade balance?

• By increasing both imports and exports equally

• By limiting imports or increasing exports

• By devaluing their currency

• By stopping all trade activities