Which one of the following would lead to a fall (depreciation) in the exchange rate for a country's currency?

Answer(s): A

The euro currency market is

Markets within the European Union where foreign currencies are bought and sold.
The market for the single European currency, the euro.
The market for bank deposits denominated in a currency other than that of the country where the bank is located.
The market for bank deposits which can be switched into any other currency at 24 hours notice.

Answer(s): C

All of the following are true under a system of floating (flexible) exchange rates except which one?

Balance of payments deficits and surpluses are automatically corrected.
There is no danger of long term undervaluation or overvaluation of the currency.
The prices of imports and exports change as the supply and demand for the currency change.
Balance of payments adjustment occurs without any effect on the domestic economy.

Answer(s): D

In a system of freely floating exchange rates the central bank and government will

Not need to engage in exchange equalization
Allow market forces to determine the exchange rate within a strictly limited band
Have less ability to control the money supply than in a fixed exchange rate system
Have to intervene in foreign exchange markets in order to maintain the system

Answer(s): A

Free CIMAPRA17-BA1-1 Exam Braindumps (page: 65)