A. The government intervenes to influence the exchange rate
B. The exchange rate should adjust to equate the supply and demand of the currency
C. The Balance of payments should always be in surplus
D. The Balance of payments will always equal the government budget
Related Mcqs:
- Which exchange rate system involves a leaning against the wind|| strategy in which short-term fluctuations in exchange rates are reduced without adhering to any particular exchange rate over the long run ?
A. pegged of fixed exchange rates
B. adjustable pegged exchange rates
C. managed floating exchange rates
D. free floating exchange rates - Under floating exchange rates, expectations of higher interest rates are likely to cause an ____ of the exchange rate?
A. depreciation
B. appreciation
C. fall
D. devaluation - If one country, with floating exchange rates, has higher inflation than its competitors we would expect its exchange rate to ?
A. appreciate
B. depreciate
C. revalue
D. be in short supply - Under managed floating exchange rates if the rate of inflation in the United States is less than the rate of inflation of its trading partners the dollar will likely ?
A. appreciates against foreign currencies
B. depreciates against foreign currencies
C. be officially revalued by the government
D. be officially devalued by the government - If there is a balance of payments deficit then in a floating exchange rate system ?
A. The external value of the currency would tend to fall
B. The external value of the currency would tend to rise
C. The injections from trade are greater then the withdrawals
D. Aggregate demand is increasing - What is the rate of exchange or exchange rate ?
A. Power to buy foreign currency
B. Foreign currency holding
C. Ratio at which unit of one country’s currency is exchanged for unit of another country currency
D. None of them - The University of Pennsylvania researchers Summers and Heston compute the price level of GDP as the ratio of purchasing power parity (PPP) exchange rate to the actual exchange rate where ?
A. both exchange rates are measured s the domestic currency price of the US-dollar
B. both exchange rates are not converted into international dollars
C. both exchange rate are pegged
D. both exchange rate are converted into Big Mac PPP formula - Which exchange rate system does not require monetary reserves for official exchange rate intervention ?
A. floating exchange rates
B. pegged exchanged rates
C. managed floating exchange rates
D. dual exchange rates - Which exchange rate mechanism in intended to insulate the balance of payments from short-term capital movements while providing exchange rate stability for commercial transactions ?
A. dual exchange rates
B. managed floating exchange rates
C. adjustable pegged exchange rates
D. crawling pegged exchange rates - Suppose that the purchasing power parity estimate of the dollar/euro exchange rate is $1.30 per euro, and the current spot rate is $1.3 8 per euro. Comparing these two exchange rates from a long-run viewpoint you would ?
A. anticipate the dollar to depreciate against the euro
B. anticipate the dollar to appreciate against the euro
C. anticipate the dollar’s exchange rate against the euro to remain constant
D. have no anticipation concerning future movements in the dollar/euro exchange rate
