10 Questions
What is the foreign exchange market?
A market where people use one currency to buy another currency
What are the four groups that participate in the foreign exchange market?
Import/export firms, tourists, international investors, and financial investors
What is foreign direct investment?
Purchasing ownership in a foreign firm or starting a new enterprise in a foreign country
What is portfolio investment?
A purely financial investment that does not entail any management responsibility
How do strengthening and weakening of currency affect exchange rates and purchasing power?
They affect both exchange rates and purchasing power
What are some factors that influence exchange rates?
GDP, market expectations, and inflation
What is purchasing power parity?
The exchange rate that equalizes the prices of internationally traded goods across countries
Why are central banks concerned about exchange rates?
They affect aggregate demand, international trade, and balance of trade
What are the three exchange rate policies?
Floating, hard peg, and soft peg
What is the relationship between demand and supply in the foreign exchange market?
They are closely interrelated
Study Notes
- The foreign exchange market is where people use one currency to buy another currency.
- Demand and supply are closely interrelated in the foreign exchange market.
- Four groups participate in the market: import/export firms, tourists, international investors, and financial investors.
- Foreign direct investment involves purchasing ownership in a foreign firm or starting a new enterprise in a foreign country.
- Portfolio investment is a purely financial investment that does not entail any management responsibility.
- Strengthening and weakening of currency affect exchange rates and purchasing power.
- Factors that influence exchange rates include GDP, market expectations, and inflation.
- Purchasing power parity is the exchange rate that equalizes the prices of internationally traded goods across countries.
- Central banks are concerned about exchange rates because they affect aggregate demand, international trade, and balance of trade.
- Exchange rate policies include floating, hard peg, and soft peg.
Test your knowledge of the foreign exchange market with our quiz! From demand and supply to exchange rate policies, this quiz covers all the essentials. Learn about the different types of investors, the factors that influence exchange rates, and the impact of currency strength on purchasing power. Whether you're a beginner or an expert, this quiz is sure to challenge you and expand your understanding of the world of foreign exchange. Get ready to show off your skills and take on the challenge!
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
