Econ Quiz Flashcards
Hard currency peg
Exchange rate policy where the gov. Sets a fixed and unchanging value
Foreign exchange market
Market in which people or firms use one currency to purchase another currency
Depreciating
When a currency is worth less in terms of other currencies; weakening
Dollarize
A country choosing to use the US dollar as it’s currency
Foreign direct investment
Purchasing a firm (at least 10%) in another country or starting a new business in a foreign country
Appreciating
When a currency is worth more in terms of other currencies; strengthening
Exchange rate
Price of one currency expressed in terms of units of another currency
Merged currency
A common currency, when several nations decide to use the same currency
Hedge
Using a financial transaction to protect against risk I.e. locking in an exchange rate
Floating exchange rate
Country allows the market to determine exchange rate currency
True or false: the foreign exchange market is by far the smallest market in the world
False
T/F: Future Price expectations of a currency have no impact on the demand for the currency
false
T/F: a US tourist traveling abroad prefers a strong US dollar
True
T/F: a high inflation rate will increase the demand for a country’s currency
False
T/F: the Big Mac index compares the prices of McDonald’s Big Mac across counties to determine whether or not a currency is over or undervalued
True
Which of the following will lead to a decrease in US aggregate demand, criteria paribus?
A strong US dollar
This exchange rate is used to compare the GDP of different countries
Purchasing power parity exchange rate
A weak US dollar may cause which of the following
A decrease in US aggregate supply and an increase in US aggregate demand
Which of the following scenarios may cause a bank to lose money?
Borrowing money in US dollars and repayment of the loan after the banks home currency weakens
Approximately what percentage of countries use a floating exchange rate?
40%
Which country recently left the European Union?
United Kingdom
The__________is an example of a large-scale common currency
Euro
If a nation merges its currency with another nation to create a single currency, what must it give up?
The ability to determine it’s own nationally-oriented monetary policy
A depreciating US dollar is_______because it’s worth____ in terms of other currencies
Weakening; less
