国际金融Chapter 3.doc

Chapter 3: The Foreign Exchange MarketMultiple Choice Questions1. Foreign exchange is:a. The act of trading different nations monies.b. The holdings of foreign currency.c. The act of importing foreign goods and services.d. Both (a) and (b) are correct.2. Suppose the exchange rate between the Japanese yen and the U.S. dollar is 100 yen per dollar. A Japanese stereo with a price of 60,000 yen will cost:a. $1,667b. $600c. $6,000d. $1003. The _ exchange rate is the price for “immediate” currency exchange. a. Current b. Forwardc. Futured. Spot4. The foreign exchange market is:a. A single gathering place where traders shout buy and sell orders at each other.b. Located in New York.c. A grouping, by electronic means, of banks and traders who work at banks that conduct foreign exchange trades. d. Located in London.5. The U.S. dollar is called a _ because it is often used as an intermediary to accomplish trading between two other currencies. a. Vehicle currencyb. Main currencyc. Common currencyd. Primary currency6. Which of the following is NOT a function of the interbank operations of the foreign exchange market? a. Provides a bank with a continuous stream of information on conditions in the foreign exchange market. b. Provides a bank the means to readjust its own position quickly and at low cost.c. Permits a bank to take on a position in a foreign currency quickly.d. Provides a bank with technological resources for use in foreign exchange trading. 7. Interbank trading is conducted directly between _ or through the use of _ that provide anonymity until the trade is complete and reduce search costs.a. Traders; brokersb. Brokers; tradersc. Individual consumers; the governmentd. Individual consumers; brokers8. U.S. exports of goods and services will create a _ foreign currency and a _ U.S. dollars. a. Demand for; supply ofb. Supply of; demand forc. Shortage of; demand ford. Supply of; shortage of9. U.S. capital inflows will create a _ foreign currency and a _ U.S. dollars.a. Demand for; supply ofb. Supply of; demand forc. Shortage of; demand ford. Supply of; shortage of10. As the value of the yen falls relative to the U.S. dollar:a. Japanese goods become more expensive to U.S. consumers.b. The supply of dollars will fall.c. The demand for yen will rise.d. U.S. goods become less expensive to Japanese consumers.11. Shifts in demand away from French products and toward U.S. products (caused by forces other than changes in the exchange rate) would result in extra attempts to _ euros and _ dollars. a. Buy; buyb. Sell; sellc. Sell; buyd. Buy; sell12. A decrease in German residents willingness to invest in dollar-denominated assets will shift the demand curve for: a. Euros to the right.b. Euros to the left.c. Dollars to the right.d. Dollars to the left.13. In a _ exchange rate system the government or central bankers intervene to keep the exchange rate virtually steady.a. Fixedb. Market drivenc. Floatingd. ForwardExchange Rate$/Figure 17.1: The Market for British PoundsSD2.502.00s(millions)55.5614. Referring to Figure 17.1, a downward movement along the vertical axis would correspond to a(n) _ of the U.S. dollar.a. Arbitraging.b. Devaluationc. Appreciationd. Depreciation15. Referring to Figure 17.1, if the British government wants to peg the exchange rate of the pound at $2.50 per pound, what action would British monetary authorities have to undertake?a. Sell 1 million pounds and buy 2.5 million dollars.b. Buy 1 million pounds and sell 1 million dollars.c. Buy 1 million pounds and sell 2.5 million dollars.d. Buy 5.5 million pounds and sell 11 million dollars.16. Referring to Figure 17.1, if the British pound is pegged at $2.50 per pound who will this help?a. US importers.b. British importers.c. British exporters.d. British import-competing producers.17. Referring to Figure 17.1, if the U.S. Federal Reserve was to conduct a contractionary monetary policy, the _ curve would shift right and the pound would _.a. Supply, appreciateb. Demand, depreciatec. Supply, depreciated. Demand, appreciate18. Other things equal, if American exports to Japan increase and American imports from Japan decrease, then, under a floating exchange rate system, we would expect the dollar to:a. Weaken against the Japanese yen.b. Depreciate against the Japanese yen.c. Devalue against the Japanese yen.d. Strengthen against the Japanese yen.19. Under a fixed exchange rate system a fall in the market price (the exchange rate value) of a currency is called a(n) _ of that currency.a. Revaluationb. Devaluationc. Appreciationd. Depreciation20. How could you profit if the exchange rate in London was $2/ while in New Yor