What is the primary goal of a country's central bank?
Maximizing employment
Minimizing inflation
Stabilizing exchange rates
Promoting economic growth
#2
Which of the following is a floating exchange rate regime?
Fixed exchange rate
Crawling peg
Currency board arrangement
Managed float
#3
What is the term used to describe a situation where a country's imports exceed its exports?
Trade deficit
Trade surplus
Balance of payments surplus
Current account surplus
#4
Which of the following is a factor that can affect the demand for a currency in the foreign exchange market?
Interest rates
Government budget deficit
Economic growth rate
All of the above
#5
In the context of exchange rates, what does 'appreciation' mean?
A decrease in the value of a currency relative to other currencies
An increase in the value of a currency relative to other currencies
A currency that is freely traded in the foreign exchange market
A currency that is pegged to another currency
#6
The purchasing power parity theory suggests that exchange rates adjust to:
Trade balances
Interest rates
Inflation differentials
Fiscal policies
#7
Which international organization acts as a lender of last resort for countries facing balance of payments problems?
World Trade Organization (WTO)
International Monetary Fund (IMF)
World Bank
Bank for International Settlements (BIS)
#8
The Big Mac Index is used to measure:
Inflation rates
Purchasing power parity
Exchange rate volatility
Interest rate differentials
#9
Which of the following is not a determinant of exchange rates in the long run?
Relative price levels
Productivity levels
Interest rates
Government policies
#10
What is the difference between nominal exchange rates and real exchange rates?
Nominal exchange rates adjust for inflation, while real exchange rates do not.
Real exchange rates are adjusted for inflation, while nominal exchange rates are not.
Nominal exchange rates are used for goods and services, while real exchange rates are used for financial transactions.
There is no difference between nominal and real exchange rates.
#11
Under the theory of uncovered interest rate parity, if the interest rate in one country increases relative to another, what should happen to the exchange rate?
It should appreciate
It should depreciate
It remains unchanged
It fluctuates randomly
#12
What is a 'currency peg'?
An exchange rate regime where the value of a currency is fixed to another currency or a basket of currencies
An exchange rate regime where the value of a currency is allowed to fluctuate freely based on market forces
An exchange rate regime where the government intervenes to stabilize the currency's value
An exchange rate regime where the currency's value is determined by supply and demand
#13
What is a 'carry trade'?
A trade where goods are carried across borders to take advantage of differences in prices
A trade where investors borrow in a currency with a low interest rate and invest in a currency with a high interest rate
A trade where investors exchange one currency for another in anticipation of currency appreciation
A trade where investors hedge against currency risk using financial derivatives