Question 1

Which of the following is true of arbitrage opportunities in foreign exchange markets?

Accepted Answer

A)  They usually tend to be large.
B)  They tend to disappear in minutes.
C)  They tend to occur very frequently.
D)  They are one of the riskiest trades.E) B) and D)
F) A) and C)

Question 2

Which of the following is an explanation for the failure of PPP theory to predict exchange rates more accurately?

Accepted Answer

A)  It assumes away transportation costs and trade barriers.
B)  It does not take into account the law of one price.
C)  It uses a small sample size of goods.
D)  It assumes that the markets are not efficient.E) None of the above
F) All of the above

Question 3

Which of the following is a key feature of the foreign exchange market?

Accepted Answer

A)  The market never sleeps.
B)  The market is located in London.
C)  The market is characterized by high transaction costs.
D)  The market is shut for only two hours.E) A) and D)
F) A) and B)

Question 4

In the context of forecasting exchange rate movements,describe the difference between fundamental analysis and technical analysis.Which approach is preferred by economists? Why?

Accepted Answer

Fundamental analysis draws on economic t...

Question 5

The British pound used to be second in importance to the dollar as a vehicle currency,but its importance has diminished in recent years.This has resulted in London losing its leading position in the global foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 6

Companies can deal with the nonconvertibility problem by engaging in:

Accepted Answer

A)  price discrimination.
B)  countertrade.
C)  cartelization.
D)  price skimming.E) A) and B)
F) A) and C)

Question 7

If the law of one price were true for all goods and services,the purchasing power parity (PPP)exchange rate could be found from any individual set of prices.

Accepted Answer

A) True 
 B)False

Question 8

Between 1984-1985,which of the following countries have,failed to control the rate of growth in money supply,resulting in higher inflation rate and currency depreciation?

Accepted Answer

A)  Germany
B)  Argentina
C)  Norway
D)  AustraliaE) C) and D)
F) A) and C)

Question 9

The theory of purchasing power parity (PPP) links changes in the exchange rate between two countries' currencies to:

Accepted Answer

A)  changes in the countries' price levels.
B)  changes in the countries' population.
C)  changes in the countries' political structure.
D)  changes in the countries' productivity levels.E) C) and D)
F) All of the above

Question 10

Describe the efficient and inefficient market schools of thought.What conflicting theories do these schools offer?

Accepted Answer

A company's need to predict future excha...

Exam 9: The Foreign Exchange Market

The theory of purchasing power parity (PPP) links changes in the exchange rate between two countries' currencies to:

Correct Answer
verified

In the context of forecasting exchange rate movements,describe the difference between fundamental analysis and technical analysis.Which approach is preferred by economists? Why?

Correct Answer
verified
Fundamental analysis draws on economic t...
View Answer

Which of the following is a key feature of the foreign exchange market?

Correct Answer
verified

The British pound used to be second in importance to the dollar as a vehicle currency,but its importance has diminished in recent years.This has resulted in London losing its leading position in the global foreign exchange market.

Correct Answer
verified

Which of the following is an explanation for the failure of PPP theory to predict exchange rates more accurately?

Correct Answer
verified

Describe the efficient and inefficient market schools of thought.What conflicting theories do these schools offer?

Correct Answer
verified
A company's need to predict future excha...
View Answer

Which of the following is true of arbitrage opportunities in foreign exchange markets?

Correct Answer
verified

Companies can deal with the nonconvertibility problem by engaging in:

Correct Answer
verified

If the law of one price were true for all goods and services,the purchasing power parity (PPP)exchange rate could be found from any individual set of prices.

Correct Answer
verified

Between 1984-1985,which of the following countries have,failed to control the rate of growth in money supply,resulting in higher inflation rate and currency depreciation?

Correct Answer
verified

Exam 9: The Foreign Exchange Market

The theory of purchasing power parity (PPP) links changes in the exchange rate between two countries' currencies to:

Correct AnswerverifiedShow Answer

In the context of forecasting exchange rate movements,describe the difference between fundamental analysis and technical analysis.Which approach is preferred by economists? Why?

Correct AnswerverifiedFundamental analysis draws on economic t...View AnswerShow Answer

Which of the following is a key feature of the foreign exchange market?

Correct AnswerverifiedShow Answer

The British pound used to be second in importance to the dollar as a vehicle currency,but its importance has diminished in recent years.This has resulted in London losing its leading position in the global foreign exchange market.

Correct AnswerverifiedShow Answer

Which of the following is an explanation for the failure of PPP theory to predict exchange rates more accurately?

Correct AnswerverifiedShow Answer

Describe the efficient and inefficient market schools of thought.What conflicting theories do these schools offer?

Correct AnswerverifiedA company's need to predict future excha...View AnswerShow Answer

Which of the following is true of arbitrage opportunities in foreign exchange markets?

Correct AnswerverifiedShow Answer

Companies can deal with the nonconvertibility problem by engaging in:

Correct AnswerverifiedShow Answer

If the law of one price were true for all goods and services,the purchasing power parity (PPP)exchange rate could be found from any individual set of prices.

Correct AnswerverifiedShow Answer

Between 1984-1985,which of the following countries have,failed to control the rate of growth in money supply,resulting in higher inflation rate and currency depreciation?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Fundamental analysis draws on economic t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A company's need to predict future excha...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified