#1
What type of foreign exchange system allows the value of a currency to be determined by supply and demand?
Fixed exchange rate system
Pegged exchange rate system
Floating exchange rate system
Dual exchange rate system
#2
Which organization is primarily responsible for international monetary cooperation and ensuring the stability of the foreign exchange system?
World Bank
International Monetary Fund (IMF)
United Nations
World Trade Organization (WTO)
#3
What does the term 'appreciation' mean in the context of foreign exchange?
A decrease in the value of a currency
An increase in the value of a currency
Stable currency value over a long period
Temporary fluctuation in currency value
#4
Which term describes the rate at which one currency can be exchanged for another?
Interest rate
Exchange rate
Inflation rate
Growth rate
#5
What is the primary purpose of the foreign exchange (forex) market?
To facilitate global trade and investment by enabling currency conversion
To set standardized prices for currencies worldwide
To allow countries to adopt a common currency
To eliminate the need for currency exchange
#6
Which of the following is NOT a function of the foreign exchange market?
Transfer of purchasing power
Credit for international trade
Minimizing exchange rate risk
Setting global interest rates
#7
In a fixed exchange rate system, how is the value of a country's currency determined?
By the country's economic performance
By supply and demand in the foreign exchange market
By pegging it to another currency or basket of currencies
By international investors
#8
What does the term 'currency swap' refer to in foreign exchange markets?
A contract to exchange currency on a future date at a predetermined rate
Swapping old currency notes for new ones
Exchanging digital currency for physical currency
A quick transaction where currencies are exchanged at the current market rate
#9
Which of the following is a key feature of a pegged exchange rate system?
Currency value is fixed in terms of gold
Currency value is determined solely by market forces
Currency value is fixed relative to another currency or basket of currencies
Central banks do not intervene in the foreign exchange market
#10
What impact does a devaluation of a country's currency have on its exports and imports?
Exports become more expensive and imports cheaper
Exports and imports both become more expensive
Exports and imports both become cheaper
Exports become cheaper and imports more expensive
#11
What mechanism do countries under a floating exchange rate system use to influence their currency value without direct intervention in the forex market?
Interest rate adjustments
Currency pegging
Imposing currency controls
Quantitative easing
#12
What is 'carry trade' in the context of foreign exchange?
A trade strategy that involves selling a high-interest-rate currency to buy a low-interest-rate currency
A trade strategy that involves buying a high-interest-rate currency using a low-interest-rate currency
A direct exchange of goods and services without the use of currency
The process of carrying out large foreign exchange transactions to minimize market impact
#13
How do central banks typically intervene in the foreign exchange market?
By changing the country's time zone
By setting the national minimum wage
By buying or selling their own currency
By directly setting exchange rates without market involvement
#14
What is a 'forward contract' in the foreign exchange market?
An agreement to conduct a currency transaction at a past date
An agreement to exchange currencies at a future date and at a predetermined rate
A contract that obligates countries to adopt a fixed exchange rate
A financial instrument that requires exchange of currencies within 24 hours
#15
What is the effect of a central bank selling its own currency in the foreign exchange market?
It increases the value of the currency
It decreases the value of the currency
It has no effect on the currency value
It stabilizes the exchange rates without affecting the currency's value