Which one of the following systems would most often be used by a developing economy? A) target zone B) currency board C) floating exchange rate D) crawling peg ANSWER Answer: D
Date: September 19th, 2020
What is the most likely outcome if a central bank suddenly prints a large amount of new money? A) no change in the inflation rate B) higher inflation C) recession D) prosperity ANSWER Answer: B
Date: September 19th, 2020
Why are pegged exchange rates often overvalued and difficult to governments to maintain? What will be an ideal response? ANSWER Answer: Governments that maintain a pegged exchange rate often find the position difficult to maintain. Too often, the exchange rate overvalues the local currency on the foreign exchange markets. This situation produces a […]
Date: September 19th, 2020
For a fixed exchange rate system to work successfully, the government that oversees its operations must be able to make tight budget and monetary policies prevail from the beginning. Agree or disagree and explain why. What will be an ideal response? ANSWER Answer: Under a fixed exchange rate system, there is a strong […]
Date: September 19th, 2020
How would a target zone system or a pegged exchange rate system that has been in place mask the true currency risk? What will be an ideal response? ANSWER Answer: If the peg or target zone holds for a long time, historical volatility appears to be zero or very limited, but this may […]
Date: September 19th, 2020
What is the name for the composite currency that consists of various units of other currencies? A) pegged currency B) seignorage C) basket of currency D) special drawing rights ANSWER Answer: C
Date: September 19th, 2020
What is the firm’s marginal profit contribution from sales under the proposed plan of initiating the cash discount? (See Table 14.7) A) $22,500 B) $40,000 C) $62,500 D) $100,000 ANSWER C
Date: September 19th, 2020
The exchange rate system in which a country allows the value of the currency to be determined by the market forces of supply and demand is known as a A) currency board. B) floating exchange rate. C) target zone. D) pegged exchange rate system. ANSWER Answer: B
Date: September 19th, 2020
In the ________ exchange rate system, the currency has limited flexibility and the rate is kept within a fixed band. A) currency board B) floating exchange rate C) target zone D) pegged exchange rate system ANSWER Answer: C
Date: September 19th, 2020
What is the name of the account in which many central banks require their banks to hold a percentage of the deposits as reserves at the central bank? A) retained earnings B) excess reserves C) margin account D) required reserves ANSWER Answer: D
Date: September 19th, 2020
