A currency exchange rate that changes accordingly to supply and demand without government intervention is referred to as a fixed exchange rate.
Currency Exchange Rate Quiz

Quiz
•
Social Studies
•
11th Grade
•
Medium
Leanne Magree
Used 7+ times
FREE Resource
16 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
True
False
Answer explanation
A currency exchange rate that changes according to supply and demand without government intervention is called a floating exchange rate, not a fixed exchange rate. Therefore, the statement is false.
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
A depreciation of Country A's currency will occur when there is a decrease in Country A's demand for exports.
True
False
Answer explanation
A depreciation of Country A's currency occurs when demand for its exports decreases, leading to lower foreign currency inflows. Thus, the statement is True.
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
An appreciation of Country A's currency will occur when there is a cash/interest rate cut in Country A, relative to that of its trading partners.
True
False
Answer explanation
A cash/interest rate cut in Country A typically leads to a depreciation of its currency, as lower rates make investments in that country less attractive compared to others. Therefore, the statement is false.
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
An increase in demand for a currency will cause an appreciation in currency.
True
False
Answer explanation
True. An increase in demand for a currency means more people want to buy it, which raises its value relative to other currencies, leading to appreciation.
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
A decrease in supply of Country A’s currency will cause an appreciation of that currency.
True
False
Answer explanation
A decrease in the supply of Country A's currency means there are fewer units available. This scarcity leads to an increase in demand, causing the currency to appreciate. Therefore, the statement is true.
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
If Country A’s value of currency decreases over time then firms who rely on imported resources will experience higher costs of production.
True
False
Answer explanation
True. When Country A's currency value decreases, imported resources become more expensive, leading to higher production costs for firms that rely on these imports.
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
All of the following factors will lead to a depreciation of Country A’s currency: a recession in one of its trading partners, a decrease in interest rates for Country A.
True
False
Answer explanation
The statement is false because a recession in a trading partner may lead to a depreciation of Country A's currency, but a decrease in Country A's interest rates typically leads to depreciation, not both factors together.
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