#1
Which of the following is an example of a fixed exchange rate system?
Bretton Woods system
ExplanationBretton Woods established a fixed exchange rate system.
#2
What does PPP (Purchasing Power Parity) theory primarily explain?
Exchange rate movements
ExplanationPPP theory focuses on explaining movements in exchange rates.
#3
What is the main purpose of the International Monetary Fund (IMF)?
Providing financial assistance to developing countries
ExplanationThe IMF primarily provides financial aid to developing nations.
#4
Which country is not part of the Eurozone as of 2024?
Sweden
ExplanationAs of 2024, Sweden is not part of the Eurozone.
#5
What is the main objective of currency intervention by central banks?
To influence exchange rates
ExplanationCurrency intervention by central banks aims to influence exchange rates.
#6
Under a floating exchange rate system, currency values are primarily determined by:
Supply and demand in the foreign exchange market
ExplanationCurrency values in a floating system are driven by supply and demand in the foreign exchange market.
#7
Which of the following is a drawback of a fixed exchange rate system?
Speculative attacks
ExplanationSpeculative attacks are a drawback of fixed exchange rates, leading to currency crises.
#8
What is a 'currency peg'?
A policy where a country's currency value is tied to another country's currency or a basket of currencies
ExplanationA currency peg is a policy tying a country's currency value to another currency or a basket of currencies.
#9
What does the term 'currency appreciation' refer to?
An increase in the value of a currency relative to others
ExplanationCurrency appreciation denotes an increase in a currency's value compared to others.
#10
What is a 'carry trade' in the context of currency trading?
A strategy to exploit interest rate differentials between currencies
ExplanationA carry trade is a strategy exploiting interest rate differences between currencies.
#11
What is the Trilemma in international macroeconomics?
The impossibility to maintain fixed exchange rates, free capital movement, and an independent monetary policy simultaneously
ExplanationThe Trilemma posits the inability to have fixed exchange rates, free capital movement, and an independent monetary policy at the same time.
#12
What is the Bretton Woods Agreement?
An accord creating a fixed exchange rate system
ExplanationThe Bretton Woods Agreement established a system of fixed exchange rates.
#13
What is the significance of the Plaza Accord?
A pact to stabilize exchange rates among major economies
ExplanationThe Plaza Accord aimed to stabilize exchange rates among major economies.
#14
What is the 'impossible trinity' in international economics?
The concept that a country cannot have stable exchange rates, free capital movement, and an independent monetary policy simultaneously
ExplanationThe 'impossible trinity' asserts that a country cannot have stable exchange rates, free capital movement, and an independent monetary policy simultaneously.
#15
What is 'competitive devaluation'?
A situation where multiple countries devalue their currencies to gain a competitive advantage in international trade
ExplanationCompetitive devaluation is when multiple countries devalue their currencies to gain a competitive edge in international trade.