Choose the correct option for the following

41.

_______________ is the sale of a foreign currency when the exchange rate falls or is lower, in the expectation that it will fall even lower in the future:

A. Destabilizing speculation.

B. Stabilizing speculation.

C. Hedging.

D. Arbitrage.

42.

If the spot rate for Euro(€) is $1.32/€ and the 90 day forward rate is $1.44/€ then the forward rate carries how much forward premium or discount?

A. 33.32% premium.

B. 9.09% discount.

C. 36.36% premium.

D. 8.33% discount.

43.

Find out the cross rate between US$ and British Pound Sterling(£) if the spot rate between British Pound Sterling and Japanese Yen(¥) is ¥121/£and the spot rate between US$ and Japanese Yen is ¥85/$.

A. $1.52/£.

B. $1.42/£.

C. $0.70/£.

D. £1.52/$.

44.

If the exchange rate between Euro (€) and US$ is $1.32/€ and the exchange rate between Euro and Swiss Franc (SF) is SF1.21/€ then the exchange rate between US$ and SF is:

A. $1.09/SF.

B. $1.6/SF.

C. $0.626/SF.

D. $0.92/SF.

45.

According to the law of one price, in order for commodity arbitrage to equalize the price of traded commodities, it is necessary to assume all of the following except?

A. Zero transportation costs.

B. No tariffs.

C. No none tariff barriers.

D. Strong differentiation among the traded goods.

46.

When depreciation of the US dollar occurs compared to the EURO, US residents will find European imports _________ , because US residents need ________ dollars to purchase each Euro.

A. Cheaper; More.

B. Cheaper; Fewer.

C. More expensive; More.

D. Less expensive; Fewer.

47.

The ____________ operated from 1880 until the outbreak of World War 1 in 1914.

A. Gold standard.

B. Silver stanard.

C. Stable foreign exchange market.

D. Marshall-Lerner condition.

48.

The equilibrium level of income in an open economy is where:

A. Savings + Investment = Imports + Exports.

B. Consumption + Savings = Imports + Exports.

C. Savings + Exports = Investment + Exports.

D. Savings + Imports = Investment + Exports.

49.

The loss of surplus associated with the expansion of domestic production resulting from the tariff is attributed to: A. Production effect of a tariff.

B. Terms of trade effect of a tariff.

C. Revenue effect of a tariff.

D. Consumption effect of a tariff.

50.

Suppose one country induces another to reduce exports of a particular commodity under threat of greater consequences, this would be known as:

A. Dumping.

B. A voluntary export restraint.
C. A quota.
D. An export subsidy.

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