This quiz works best with JavaScript enabled. Home > Economics > International > Currency > Foreign Currency Markets – Quiz 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Foreign Currency Markets Quiz 2 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. The theory of ..... states that the prices of tradable goods, when expressed in a common currency, will tend to equalize across countries as a result of exchange rate changes. A) Supply and demand. B) Purchasing power parity. C) Arbitrage. D) Competitive advantage. Show Answer Correct Answer: B) Purchasing power parity. 2. The exchange rate at which demand for foreign currency is equal to its supply is called: A) Equilibrium exchange rate. B) Floating exchange rate. C) Par exchange rate. D) Both (a) & (c). Show Answer Correct Answer: D) Both (a) & (c). 3. Appreciation of domestic currency will A) Encourage imports. B) Encourage Exports. C) Discourage imports. D) None of above. Show Answer Correct Answer: A) Encourage imports. 4. There are 2 types of foreign currency trading:i. Primary marketii. Secondary marketiii. Spot marketiv. Forward market A) I and ii. B) Iii and iv. C) Ii and iv. D) None of above. Show Answer Correct Answer: B) Iii and iv. 5. Dirty float is another term for ..... A) Par value. B) Flexible float. C) Managed float. D) Illegal float. Show Answer Correct Answer: C) Managed float. 6. When US dollar exchanges for Rs.50 instead of Rs55 earlier, the domestic currency shows: A) Currency appreciation. B) Currency depreciation. C) Currency devaluation. D) None of these. Show Answer Correct Answer: A) Currency appreciation. 7. Higher interest rates will cause hot money flows and increase demand for the currency. Higher interest rates make it relatively more attractive to save in the said country. A) BORROWING. B) JOINING FIXED EXCHANGE RATES. C) CHANGING INTEREST RATES. D) None of above. Show Answer Correct Answer: C) CHANGING INTEREST RATES. 8. ..... focus on offering banking and other financial services to nonresident customers. A) Offshore financial centers. B) Branch banks. C) Subsidiary banks. D) Affiliated banks. Show Answer Correct Answer: A) Offshore financial centers. 9. When an overseas banking operation is jointly owned by a parent bank and a local or foreign partner, what is it called? A) Subsidiary bank. B) Correspondent bank. C) Branch bank. D) Affiliated bank. Show Answer Correct Answer: D) Affiliated bank. 10. Reduction of value of currency due to market forces A) Appreciation. B) Revaluation. C) Devaluation. D) Depreciation. Show Answer Correct Answer: D) Depreciation. 11. If the Mexican Peso depreciates in relation to the Chinese Yuan, how is Mexico affected? A) Mexico has less purchasing power in Chinese currency. B) Mexico benefits from increased purchasing power. C) Mexico would have more Chinese investors. D) They would be invaded by China. Show Answer Correct Answer: A) Mexico has less purchasing power in Chinese currency. 12. Countries that want to join the IMF must ..... A) Pay a quota. B) Pay each of the existing members an entrance fee. C) Agree to allow IMF conditionally. D) Recognize the importance of the US. Show Answer Correct Answer: A) Pay a quota. 13. The fastest method of transaction in exchanging currencies A) OPTION TRANSACTION. B) SPOT TRANSACTION. C) SWAP TRANSACTION. D) FUTURE TRANSACTION. Show Answer Correct Answer: B) SPOT TRANSACTION. 14. Assume the exchange rate from Mexican pesos to American dollars is 8 pesos to $ 1. If a bushel of wheat is 12 pesos in Mexico, how many bushels in Mexico could $ 1200 buy? A) 400 bushels. B) 200 bushels. C) 1000 bushels. D) 800 bushels. Show Answer Correct Answer: D) 800 bushels. 15. Higher tariffs and quotas cause a country's currency to ..... in the ..... run, everything else held constant. A) Depreciate; long. B) Depreciate; short. C) Appreciate; long. D) Appreciate; short. Show Answer Correct Answer: C) Appreciate; long. 16. Contract Lot Sizes:The standard unit of a mini lot has a value of ..... ? A) 1, 000. B) 1. C) 100, 000. D) 100. Show Answer Correct Answer: A) 1, 000. 17. A bond that is issued by Nestle, a Swiss company, that is denominated in yen and sold to residents of Japan is most likely a ..... A) Eurobond. B) Global bond. C) Foreign bond. D) Domestic bond. Show Answer Correct Answer: C) Foreign bond. 18. The IMF started to operate in ..... A) 1947. B) 1995. C) 1944. D) 1954. Show Answer Correct Answer: A) 1947. 19. Rate of Exchange as determined by the government is called: A) Fixed Exchange Rate. B) Floating Exchange Rate. C) Flexible exchange rate. D) None of these. Show Answer Correct Answer: A) Fixed Exchange Rate. 20. What is Safwah's full name? A) Nurul Safwah Binti Mohd Ruslan. B) Nur Safwah Binti Ruslan. C) Ahmad Safwah Binti Abdul Ruslan. D) Safwah Binti Ahmad Ruslan. Show Answer Correct Answer: B) Nur Safwah Binti Ruslan. 21. The price of foreign exchange is set by ..... A) The international monetary fund. B) The gold standard. C) Demand and supply in the marketplace. D) The World Bank. Show Answer Correct Answer: C) Demand and supply in the marketplace. 22. Only 5% of all foreign exchange trading is related to ..... A) Export and travel. B) Travel. C) Trade or business. D) None of above. Show Answer Correct Answer: C) Trade or business. 23. The following countries uses dollar as currency except A) New Zealand. B) Great Britain. C) USA. D) Canada. Show Answer Correct Answer: B) Great Britain. 24. EUR / USD = 1.35052 The second number 5 in 1.35052? is called A) Pip. B) Quote Currency. C) Fractional Pip. D) Base Currency. Show Answer Correct Answer: A) Pip. 25. The purpose of the ..... is to oversee the functioning of the international monetary system. A) World Bank. B) International Bank for Reconstruction and Development. C) International Development Association. D) International Monetary Fund. Show Answer Correct Answer: D) International Monetary Fund. 26. Contract Lot Sizes:The standard lot has a value of ..... ? A) 10 dollars per pip. B) 1 dollar per pip. C) 100 dollars per pip. D) 0.1 dollars per pip. Show Answer Correct Answer: A) 10 dollars per pip. 27. Majority of retail forex trading happens in A) Swap market. B) Futures market. C) Spot Market. D) Forward Market. Show Answer Correct Answer: C) Spot Market. 28. Borrows one currency where interest rates are low and invests these in another currency where interest rates are high A) Carry Trade. B) Currency Conversion. C) Swap. D) Exchange Rate. Show Answer Correct Answer: A) Carry Trade. 29. Spot market is a market for spot rate and spot date. When is the exact of spot date? A) The date both parties deal with each other to perform foreign currency transaction. B) Two days after transaction. C) Days exclude holidays and weekends. D) None of above. Show Answer Correct Answer: B) Two days after transaction. 30. Exchange rate is the price of a currency expressed in terms of: A) Gold. B) Metal. C) Another currency. D) None of these. Show Answer Correct Answer: C) Another currency. ← PreviousNext →Related QuizzesInternational QuizzesEconomics QuizzesForeign Currency Markets Quiz 1Foreign Currency Markets Quiz 3Foreign Currency Markets Quiz 4Foreign Currency Markets Quiz 5Foreign Currency Markets Quiz 6 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books