International Trade

Question 1

Exchange rate

Answer 1

The rate at which one currency will be exchanged for another

Question 2

Exchange rates are quoted two ways

Answer 2

Direct quote

If an exchange rate is an indirect quote, it is stated as a number of foreign units per one unit of domestic currency

Question 3

Competitive advantage is a strategic advantage that

Answer 3

One business entity has over its rival entities within its competitive industry

Question 4

Foreign exchange for travelers is

Answer 4

People needing to exchange currencies in a number of situations

Question 5

Types of foreign currency

Answer 5

Travelers check
Travelers card
Foreign currency cash

Question 6

What can be done with leftover foreign currency

Answer 6

You can sell it to a bank or money change

Question 7

Fluctuation in exchange rate is determined by

Answer 7

The country and their management of the value of its currency

Question 8

Floating exchange rate

Answer 8

Type of exchange rate regime wherein a currency’s value is allowed to fluctuate according to the foreign exchange market

Question 9

What causes currency to be 1. More valuable 2. Less valuable

Answer 9

When demand for it is greater than supply

When demand is less than the supply

Question 10

Transactional demand

Answer 10

Highly correlated to a country’s level of business activity, gross domestic product (GPD), and employment levels

Question 11

Speculative demand

Answer 11

Much harder for central banks to accommodate which they influence by adjusting interest rates

Question 12

Factors that affect the balance of trade

Answer 12

1. The cost of production in the export economy vis-à-vis those in the importing economy
2. The cost and availability of raw materials, intermediate goods, and other imports
3. Exchange rate movements
4. Multilateral, bilateral and unilateral taxes or restrictions in trade
5. Non tariff barriers
6. The availability of adequate foreign exchange with which to pay for imports
7. Prices of goods manufactured at home

Question 13

Balance of payments

Answer 13

Accounts are an accounting record of all monetary transactions between a country and the rest of the world

Question 14

Current account

Answer 14

An important indicator about an economy’s health

Sum of the balance of trade net income from abroad and net current transfers

Question 15

Capital account

Answer 15

Is one of two primary components of the balance of payments, the other being current account; reflects net change in national ownership of assets

Question 16

The term is used when?

Answer 16

When their is an imbalance

Question 17

Fixed exchange rate

Answer 17

Type of exchange rate regime wherein a currency’s value is matched to the value of another single currency , or to a basket of other currencies, or to another measure of value

Question 18

Alternatives to a fixed exchange rate

Answer 18

1. a managed float where some changes of exchange rates are allowed
2. A purely floating exchange rate , also known as purely flexible exchange rate

Question 19

I’m export led growth the balance of trade will?, in import led growth the balance of trade will

Answer 19

Improve during economic expansion,

Worsen at economic expansion

Question 20

Why is measuring the balance of trade problematic

Answer 20

Problems with recording or collecting data

Question 21

Types of currency

Answer 21

Hybrid, pegged or fixed, free floating