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- 1. Multiple Choice
What is an exchange rate?
The rate at which goods are exchanged between two countries
The price of one nation's currency in terms of another's
How many US dollars you can exchange for RMB at Travelex
The price of goods in terms of a foreign currency
- 2. Multiple Choice
According to the table, what is the Euro equivalent of 1 USD?
1.32 Euros
0.53 Euros
.76 Euros
1.59 Euros
- 3. Multiple Choice
According to the table, what is the USD equivalent of 1 Australian?
0.97 USD
1.32 USD
1.28 USD
1.03 USD
- 4. Multiple Choice
How is an exchange rate determined in the money market?
The forces of supply and demand
Government/the Federal Reserve Bank
Whatever sellers of goods are willing to take
Investors decide the value of the currency they wish to invest
- 5. Multiple Choice
Why do changing exchange rates help one country and hurt the other?
One side loses purchasing power and the other gains it
Takes money away from one side and gives it to the other
Causes war between the two countries
One country's government introduces tariffs to protect local industries
- 6. Multiple Choice
What type of exchange rate system do most countries operate under?
Flexible
Floating
Fictitious
Fixed
- 7. Multiple Choice
What is the difference between a fixed rate exchange system and a floating rate system?
Government sets rate vs market sets rate
Doesn't exist vs does exist
Never changing vs always changing
Currency never appreciates vs can appreciate
- 8. Multiple Choice
If the US $ were to appreciate in relation to the Euro, what effect would this have?
European consumers would have more purchasing power in US
US consumers can buy more European goods and services for fewer $
US consumers can buy more English goods and services for fewer $
European tourists to the US will spend more $
- 9. Multiple Choice
How does inflation rate affect currency value/exchange rate?
Higher inflation leads to depreciating currency & vice versa
Increasing inflation leads to more favourable exchange rates
Higher inflation leads to currency appreciation
Lower inflation leads to more favourable exchange rate
- 10. Multiple Choice
If the Mexican Peso depreciates in relation to the Chinese Yuan, how is Mexico affected?
Mexico has less purchasing power in Chinese currency
Mexico benefits from increased purchasing power
Mexico would have more Chinese investors
They would be invaded by China
- 11. Multiple Choice
The currency exchange rate of the South African rand for the Botswana pula fell by 5.7% between August 2014 and August 2015. What would be the immediate effect of this?
Botswana’s level of protection would fall.
Botswana’s tourists travelling to South Africa would find it less expensive
South Africa’s imports would be cheaper.
South Africa’s tourists travelling to Botswana would receive more pula per rand
- 12. Multiple Choice
What is likely to cause a rise in a country’s foreign exchange rate?
a fall in its exports of goods and services
a fall in its imports of goods and services
a fall in its inflow of income
a rise in its outflow of transfers
- 13. Multiple Choice
A developing country’s two major sources of income from international trade are fishing and tourism. If the country’s exchange rate depreciated, what is likely to happen?
Imported goods would become cheaper for local people.
The country would definitely become poorer.
The price of fish sold as exports would become cheaper.
Tourists to the country would be discouraged by higher prices.
- 14. Multiple Choice
When the US$ exchange rate falls it will usually
help to reduce a US trade deficit.
increase the foreign price of US exports.
reduce the price of US imports.
reduce US inflation
- 15. Multiple Choice
In 2009 the exchange rate of the Singapore dollar changed from 1.49 = 1 US dollar to 1.43 Singapore dollars = 1 US dollar.
How would this affect the import prices and export prices for Singapore?
decrease/decrease
decrease/increase
increase/decrease
increase/increase
- 16. Multiple Choice
The US currently trades in oil with the UK. The discovery of new oil and gas deposits in the US will mean that its oil imports decrease and its oil exports increase.
From the initial equilibrium point of X, which letter indicates the new equilibrium point for the US exchange rate?
A
B
C
D
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