Foreign Exchange Market-Revision

Imran and Rush are discussing how changes in income levels affect the demand for foreign products. They wonder:

• If Imran's income decreases, will his demand for foreign products decrease?

• If the interest rate remains constant, will Rush's demand for domestic products increase?

• If Rush's income increases, will his demand for foreign products increase?

Will and Xuan are planning to study abroad and they need to exchange their local currency for the currency of the country they're going to. They're wondering where they can do this. What is the market called where international currencies are bought and sold?

• Foreign exchange market: A market where international currencies are bought and sold

• A market where goods and services are traded between countries

• A market where labor and capital are exchanged

• A market where natural resources are bought and sold

• A

• B

• C

• D

• E

Use the graph to answer the question.

Junwon and Humza are discussing currency exchange. If one Indian rupee is exchanged for three Japanese yen in the foreign exchange market, which of the following describes the foreign exchange market for Indian rupees?

• There is a surplus of 40 yen.

• There is a surplus of 20 rupees.

• There is a shortage of 20 yen.

• There is a shortage of 40 rupees.

• The foreign exchange market is in equilibrium.

Hadi, Humza, and Rush are studying the foreign exchange market. They are trying to understand what can cause a change in the supply or demand for a currency. What could be the possible reasons?

• A change in foreign tastes, like Humza suddenly preferring Japanese anime, leading to increased demand for Yen

• A change in trade prices, like Rush noticing that the price of imported goods from Europe has increased, affecting the demand for Euro

• A change in income levels, like Hadi getting a raise and deciding to invest more in US dollars

• All of the above

Isa and Xuan are discussing the impact of different exchange rate systems on their country's economy. What is one argument critics make against the floating exchange rate system?

• It limits monetary policy autonomy

• It causes import prices to rise and increases inflation

• It prevents economic recovery

• It restricts trade balance adjustments

The graph above shows the foreign exchange market for United States dollars in terms of Japanese yen. Assume that Kayato and AJ notice an increase in United States consumers’ preference for Japanese automobiles. Which of the following changes will most likely take place in the market for dollars?

• It will take more yen to purchase the same amount of dollars.

• The demand for dollars will increase.

• The supply of dollars will increase.

• Both the demand for and the supply of dollars will decrease.

• There will be no change in the foreign exchange market.

• A

• B

• C

• D

• E

AJ and YoonSoo are planning a trip to Europe and need to convert their local currency into Euros. What is the market called where they can exchange their currency?

• a place where corporation and government can raise fund

• a market for converting currency of one country into another country

• trading of instrument by an exchange of securities

Zhiheng and Anisha are discussing the economy of their country. Zhiheng mentions that the value of their country’s currency will tend to appreciate if

• demand for the country’s exports increases

• the country’s money supply increases

• the country’s citizens increase their travel abroad

• domestic interest rates decrease

• tariffs on the country’s imports decrease