If a country's currency appreciates, how will this affect its exports?
Exports will increase.
Exports will decrease.
No impact on exports.
Uncertain.
When the domestic currency depreciates, the price of imported goods in the domestic market will usually:
Decrease.
Increase.
Remain unchanged.
First decrease then increase.
Which of the following is NOT a main factor affecting exchange rate fluctuations mentioned in the class?
International balance of payments.
Interest rates.
Weather conditions.
Political events.
If a country's currency appreciates, the purchasing power of its residents for imported goods will:
Increase.
Decrease.
Not change.
Fluctuate randomly.
Exchange rate fluctuations have an impact on a country's inflation level mainly through:
The price of imported goods.
The number of domestic tourists.
The color of banknotes.
The national flag design.
What determinant of exchange rates does the Purchasing Power Parity theory mainly explain?
Interest rate differences
Trade balance
Differences in price levels
Political stability
If a country adopts a fixed exchange rate system and has a balance of payments deficit, what measure is the central bank most likely to take?
Lower interest rates
Reduce foreign exchange reserves and sell domestic currency
Increase foreign exchange reserves and buy domestic currency
Relax capital controls
When the forward exchange rate is higher than the spot exchange rate, it is called