Which of the following will lead to an increase in the demand for a currency?

A rise in the demand for exports

What may be one advantage of a fixed exchange rate?

It creates certainty for trade and investment

What may be one likely disadvantage of a fixed exchange rate system?

Large holdings of foreign reserves are needed

Which of the following best defines exchange rates

The price of one currency in terms of another

When there is a rise in the interest rate

The exchange rate is likely to appreciate

Which will increase the supply of a currency?

Increase in the demand for imports

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Exchange rates

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IB Economics

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Questions 10

Answers

1
Which of the following will lead to an increase in the demand for a currency?
A decrease in the interest rate
An increase in protectionist measures
A rise in the demand for exports
A rise in the demand for imports
2
In a fixed exchange rate system, the currency may NOT be manipulated through...
Borrowing from abroad
None of the above
Buying and selling currency
Adapting monetary policy
3
When there is a fall in the level of investment from abroad, the exchange rate is likely to...
Depreciate
Appreciate
Stay the same
4
What may be one advantage of a fixed exchange rate?
There will be no retailation
It acts as an automatic stabiliser
It creates certainty for trade and investment
You have control over your monetary policy
5
What may be one likely disadvantage of a fixed exchange rate system?
Forces domestic produces to be more efficient
Creates speculation
May be inflationary
Large holdings of foreign reserves are needed
6
Which of the following best defines exchange rates
The price of one currency in terms of another
The cost of borrowing and return for savings
The value of a currency
The purchasing power of a currency
7
When there is a rise in the interest rate
The exchange rate is likely to stay the same
The exchange rate is likely to appreciate
The exchange rate is likely to depreciate
8
When an exchange rate is lowered in a fixed system is is know as...
A depreciation
A revaluation
A devaluation
An Appreciation
9
If it is considered that a currency will fall in value against another this may lead to...
The currency appreciating
The currency depreciating
The value of the currency staying the same
10
Which will increase the supply of a currency?
Increase in the demand for exports
Increase in the demand for imports
Increase in foreign borrowing
Rise in the interest rate

Exchange rates Flashcards | StudBud