#1
What is an exchange rate?
The rate at which one currency can be exchanged for another
ExplanationDefinition of exchange rate
#2
Which of the following factors influences exchange rates?
Inflation rates
ExplanationInfluence of inflation on exchange rates
#3
What is a floating exchange rate?
An exchange rate that is determined by supply and demand
ExplanationDefinition of floating exchange rate
#4
What is a currency peg?
A currency that is tied to the value of another currency
ExplanationExplanation of currency peg
#5
What is a currency swap?
An agreement to exchange currencies at a future date
ExplanationDefinition of currency swap
#6
What is the significance of the 'Big Mac Index' in understanding exchange rates?
It measures the price of a Big Mac burger in different countries to assess purchasing power parity
ExplanationExplanation of Big Mac Index
#7
What is a trade-weighted exchange rate?
An exchange rate weighted by the volume of trade between two countries
ExplanationDefinition of trade-weighted exchange rate
#8
What is the 'Bretton Woods Agreement'?
An agreement to fix exchange rates to the US dollar
ExplanationExplanation of Bretton Woods Agreement
#9
What is the role of central banks in managing exchange rates?
To intervene in foreign exchange markets
ExplanationCentral banks' role in exchange rate management
#10
What is the carry trade strategy in forex trading?
Borrowing in a currency with a low-interest rate and investing in a currency with a higher interest rate
ExplanationDefinition of carry trade strategy
#11
What does 'Purchasing Power Parity (PPP)' theory suggest about exchange rates?
Exchange rates should adjust so that identical goods cost the same in different countries
ExplanationExplanation of Purchasing Power Parity theory
#12
What is the role of the International Monetary Fund (IMF) in exchange rate management?
To intervene in foreign exchange markets
ExplanationIMF's role in exchange rate management
#13
What is the significance of the 'Impossible Trinity' in international finance?
It describes the challenge of maintaining independent monetary policy, exchange rate stability, and capital mobility simultaneously
ExplanationExplanation of Impossible Trinity