Foreign Exchange Markets Quiz

What is a foreign exchange market?

• A market where currencies are bought and sold.

• A market for trading stocks.

• A market for commodities.

• A market for real estate.

What determines the value of a currency?

• Government policy.

• Market forces of demand and supply.

• International treaties.

• Cultural factors.

What is appreciation of a currency?

• Increase in the value of a currency.

• Decrease in the value of a currency.

• Stability in currency value.

• None of the above.

What is depreciation of a currency?

• Increase in the value of a currency.

• Decrease in the value of a currency.

• Stability in currency value.

• None of the above.

What is the formula for terms of trade?

• Index of export prices x 100 / Index of imports prices.

• Index of imports prices x 100 / Index of export prices.

• Total exports / Total imports.

• None of the above.

What can be used to correct the deficit on the balance of payment?

• Changing interest rates.

• Increasing taxes.

• Decreasing exports.

• None of the above.

What is export promotion?

• Encouraging production of goods for export.

• Increasing import tariffs.

• Decreasing production costs.

• None of the above.

What is import substitution?

• Producing goods domestically instead of importing.

• Increasing imports.

• Decreasing domestic production.

• None of the above.

What is the role of a central bank in the foreign exchange market?

• To set fixed exchange rates.

• To trade currencies for profit.

• To monitor stock market performance.

• To regulate the supply of money and interest rates.

What is a trade deficit?

• When a country imports more than it exports.

• When a country exports more than it imports.

• When a country has equal imports and exports.

• None of the above.