Question

36-)

Foreign exchange ________ earn a profit by a bid-ask spread on currencies they purchase and sell. Foreign exchange ________, on the other hand, earn a profit by bringing together buyers and sellers of foreign currencies and earning a commission on each sale and purchase.

Select one:

a. speculators; arbitrageurs

b. dealers; brokers

c. central banks; treasuries

d. brokers; dealers

38-)

A country's currency that strengthened relative to another country's currency by more than that justified by the differential in inflation is said to be ________ in terms of PPP.

Select one:

a. over compensating

b. undervalued

c. under compensating

d. overvalued

39-)

If the goal were to increase the value of a country's currency - to fight a depreciation of the domestic currency in exchange for foreign currency - the central bank would:

Select one:

a. sell its own currency in exchange for foreign currency.

b. follow a expansive monetary policy.

c. drive real rates of interest down.

d. buy its own currency in exchange for foreign currency.

Answer 1