International Business and Trade: Foreign Exchange and Global Markets

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What is the primary purpose of a fixed exchange rate regime?

To promote trade in backward and underdeveloped countries

To promote international investment

To eliminate exchange control

To provide stability and predictability for international trade and investment (correct)

What happens to a currency when there is more demand for it in the foreign exchange market?

It remains unchanged

It becomes fixed

It appreciates (correct)

It depreciates

What is a benefit of the euro's stability?

Reassurance for investors and stability in financial markets (correct)

Increased competitiveness for European exports

Increased volatility in currency markets

Reduced financial market influence

What is a characteristic of a floating exchange rate regime?

The exchange rate is determined by supply and demand Signup and view all the answers

What is a potential drawback of a floating exchange rate regime?

It can be more volatile Signup and view all the answers

What is the term for a currency increasing in value relative to other currencies?

Appreciation Signup and view all the answers

What is the impact of a strong euro on European exports?

It decreases their competitiveness Signup and view all the answers

What is the purpose of a government intervening in the foreign exchange market in a fixed exchange rate regime?

To maintain the fixed exchange rate Signup and view all the answers

What is the term for a currency decreasing in value relative to other currencies?

Depreciation Signup and view all the answers

What is the impact of changes in the euro on global financial markets?

It changes the prices of stocks, loans, and other financial instruments worldwide Signup and view all the answers

International Business and Trade: Foreign Exchange and Global Markets

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Questions and Answers

What is the primary purpose of a fixed exchange rate regime?

What happens to a currency when there is more demand for it in the foreign exchange market?

What is a benefit of the euro's stability?

What is a characteristic of a floating exchange rate regime?

What is a potential drawback of a floating exchange rate regime?

What is the term for a currency increasing in value relative to other currencies?

What is the impact of a strong euro on European exports?

What is the purpose of a government intervening in the foreign exchange market in a fixed exchange rate regime?

What is the term for a currency decreasing in value relative to other currencies?

What is the impact of changes in the euro on global financial markets?

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