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Balance of Payments Test - 6

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Balance of Payments Test - 6
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Weekly Quiz Competition
  • Question 1
    1 / -0

    Exchange rate for currencies is determined by supply and demand in system of:

    Solution

    Flexible

  • Question 2
    1 / -0

    A country that does not trade with other countries is called an economy:

    Solution

    Closed

  • Question 3
    1 / -0

    It helps countries to meet deficit in balance of payments:

    Solution

    IMF

  • Question 4
    1 / -0

    What would cause a country's exchange rate to fall:

    Solution

    An increased demand for its imports

  • Question 5
    1 / -0

    Currency depreciation occurs when

    Solution

    Increase  in domestic currency price of the foreign currency implies decrease in the purchasing power of  domestic currency in terms of foreign currency . 

  • Question 6
    1 / -0

    Currency appreciation occurs when

    Solution

    It leads to increase in the purchasing power of domestic currency in terms of foreign currency as we require to pay less per unit of foreign currency now. 

  • Question 7
    1 / -0

    When currency becomes less valuable for the Rest of the world, it is called

    Solution

    Currency's value goes up (or down) if the demand for it goes up more (or less) than the supply does. In the short run this can happen unpredictably for a variety of reasons, having to do with trade flows,speculation, or other factors in the international capital market.

  • Question 8
    1 / -0

    Nominal exchange rate is the price of

    Solution

    The nominal exchange rate is defined as the number of units of the domestic currency that can purchase a unit of a given foreign currency. A decrease in this variable is termed nominal appreciation of the currency. 

  • Question 9
    1 / -0

    Real exchange rate is the price of

    Solution

    Real exchange rate tells how much the goods and services in the domestic country can be exchanged for the goods and services in a foreign country. 

  • Question 10
    1 / -0

    To buy domestic or foreign goods, the more relevant is

    Solution

    Real exchange rate says how much of goods in domestic country can be exchanged for goods in foreign country. Nominal exchange rate cannot tell us that. 

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