50+ Foreign Exchange Market MCQ’s | (Free Resource) Business Economics

41. Theory of purchasing power parity __________ .
a) neglects capital account transactions
b) includes transportation cost
c) includes prices of nontraded goods
d) applies only in short run

42. Purchasing Power Parity Theory was propounded by _________ .
a) Gustav Cassel
b) David Ricardo
c) Adam Smith
d) None of the above

43. Purchase of foreign currency by the monetary authority _________ the appreciation of domestic currency.
a) prevents
b) aggravates
c) leads to

44. _________ is monetary authority’s intervention to prevent forex fluctuations through M Policy instruments.
a) Sterilized Intervention
b) bank rate
c) open market operations
d) Un-sterilized intervention

45. ________ is monetary authority’s Intervention by purchase/sale of foreign current to prevent fluctuations in foreign exchange.
a) Unsterilised Intervention
b) Sterilized intervention
c) bank rate policy

46. ________ of goods results in demand for foreign currency.
a) Import
b) export
c) sale in domestic market
d) none of above

47. _________ results in supply of foreign currency.
a) Unilateral receipts
b) unilateral payments
c) investment abroad
d) none of above

48. Equilibrium exchange rate is determined when ________ .
a) the demand curve for foreign currency intersects with supply curve
b) demand curve shifts upwards
c) supply curves slopes downwards
d) none of the above

49. Exchange rate between two currencies is based on ________ .
a) purchasing power of two currencies
b) economic development of the two nations
c) political stability in the two countries
d) none of the above

50. Critics of Purchasing Power Parity theory state that it has limited application for _______ countries.
a) Large
b) small
c) medium-sized
d) none of the above

Answers: 41)neglects capital account transactions 42)Gustav Cassel 43)prevents 44)Sterilized Intervention 45)Unsterilised Intervention 46)Import 47)Unilateral receipts 48)the demand curve for foreign currency intersects with supply curve 49)purchasing power of two currencies 50)Large