Free CIMAPRA17-BA1-1 Exam Braindumps (page: 66)

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According to the purchasing power parity theory, if a country's inflation rate is 5% higher than the inflation rates of the country's competitors in the world economy

  1. The country's exchange rate will fall by 5% to restore the terms of trade
  2. The domestic purchasing power of the currency must fall
  3. The country's firms must reduce their export prices to remain competitive
  4. The overseas demand for the country's exports will be price elastic

Answer(s): A



If real rates of interest are positive and rising, then

  1. The average level of saving will be decreasing
  2. Lenders are gaining at the expense of borrowers
  3. The rate of inflation must be increasing
  4. The desire to hold cash balances will be increasing

Answer(s): D



All other things remaining equal, which of the following would encourage a speculative short-term capital flow into a country's currency?

  1. A fall in the country's interest rates
  2. An expected depreciation of the country's exchange rate
  3. The abolition by the country of previously-imposed exchange controls which deterred inward investment
  4. Foreign-based multinational companies locating new factories in the country

Answer(s): C



Which of the following describes a 'spot rate' in foreign currency dealing?

  1. It is a short term rate that may change in the immediate future
  2. It is the price for a currency that is to be delivered immediately
  3. It is the exchange rate minus any commissions or transactions charges
  4. It is the exchange rate minus the inflation rate

Answer(s): B



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