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FOREIGN EXCHANGE RATE Flashcards | StudBud
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FOREIGN EXCHANGE RATE
FOREIGN EXCHANGE RATE
16 terms
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StudBud Administration
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Answers
1
WHEN THE EXCHANGE RATE RISES UNDER MANAGED FLOATING, IT IS CALLED ---------OF DOMESTIC CURRENCY.
DEPRECIATION
DEVALUATION
APPRECIATION
REVALUATION
2
SUPPLY CURVE OF FOREIGN EXCHANGE IS ---
SLOPE UPWARDS
SLOPE DOWNWARDS
HORIZONTAL STRAIGHT LINE PARALLEL TO X-AXIS
VERTICAL STRAIGHT LINE PARALLEL TO Y-AXIS
3
PEOPLE DEMAND FOREIGN EXCHANGE BECAUSE ---
THEY WANT TO SEND GIFTS ABROAD
ALL OF THE ABOVE
THEY WANT TO IMPORT GOODS & SERVICES
THEY WANT TO PURCHASE FIANCIAL ASSETS FROM ABROAD
4
DEMAND FOR AMERICAN GOODS WILL RISE IN INDIA DUE TO APPRECIATION OF INDIAN CURRENCY.
True
False
5
HUGE INTERNATIONLA RESERVES ARE REQUIRED TO BE MAINTAINED BY THE GOVT. IN FIXED EXCHANGE RATE SYSTEM.
True
False
6
DEVALUATION OF CURRENCY MEANS ---
REDUCTION IN THE VALUE OF DOMESTIC CURRENCY BY THE MARKET FORCES
NEITHER (A) & (B)
BOTH (A) & (B)
REDUCTION IN THE VALUE OF DOMESTIC CURRENCY BY THE GOVT.
7
WHICH OF THE FOLLOWING IS A SOURCE OF SUPPLY OF FOREIGN CURRENCY
TOURISTS GOING ABROAD
INVESTMENTS MADE ABROAD
LOANS AND GRANTS FROM ABROAD
IMPORTS OF GOODS AND SERVICES
8
------REFERS TO A SYSTEM IN WHICH FOREIGN EXCHANGE RATE IS DETERMINED BY MARKET FORCES & CENTRAL BANK
FIXED EXCHANGE RATE
CLEAN FLOATING
DIRTY FLOATING
NONE OF THE ABOVE
9
WHEN THERE IS DEPRECIATION OF FOREIGN CURRENCY, THE SUPPLY OF FOREIGN CURRENCY IN DOMESTIC ECONOMY WILL ----
NOT CHANGE
INCREASE
EITHER INCREASE OR DECREASE
DECREASE
10
OTHER THINGS REMAINING THE SAME, WHEN FOREIGN CURRENCY BECOMES CHEAPER, THE EFFECT ON NATIONAL INCOME IS LIKELY TO BE --
NO EFFECT
POSITIVE
NEGATIVE
POSITIVE AND NEGATIVE BOTH
11
IF GOVT. BONDS IN COUNTRY A PAY 8 % INTEREST & BONDS IN COUNTRY B PAYS 10%, WHAT WILL BE EFFECT ON COUNTRY B CURRENCY
DEPRECIATION
NO EFFECT
DEVALUATION
APPRECIATION
12
WHY DOES THE CENTRAL BANK NEED TO INTERVENE IN A MANAGED FLOATING SYSTEM?
TO MAINATIN THE EXCHANGE RATE AT THE SPECIFIED LEVEL
TO REDUCE FLUCTUATIONS IN THE EXCHANGE RATE
TO COVER THE SURPLUS AND DEFICITS IN THE BOP
NONE OF THE ABOVE
13
WHICH OF THE FOLLOWING IS LIKELY TO RAISE THE FOREIGN EXCHANGE RATE?
VISITS TO FOREIGN COUNTRIES BY PEOPLE INCRESE
GOVT. GIVES INCENTIVES FOR EXPORTS
GOVT. DOUBLED THE IMPORT DUTY ON GOLD
GOVT. PROMOTES FOREIGN DIRECT INVESTMENT
14
IMPORT OF GOODS & SERVICES RAISES THE ----------OF FOREIGN EXCHANGE
DEMAND
NEITHER (A) & (B)
SUPPLY
BOTH (A) & (B)
15
IN FIXED EXCHANGE RATE SYSTEM, WHEN SOME GOVT. ACTION INCREASES THE EXCHANGE RATE, IT IS CALLED AS -----
DEPRECIATION
REVALUATION
DEVALUATION
APPRECIATION
16
UNDER MANAGED FLOATING RATE SYSTEM, CENTRAL BANK MAINTAINS RESERVES OF FOREIGN EXCHANGE
False
True
