{"id":17469,"date":"2022-04-06T13:06:35","date_gmt":"2022-04-06T07:36:35","guid":{"rendered":"https:\/\/scholarsclasses.com\/blog\/?p=17469"},"modified":"2025-01-03T13:09:41","modified_gmt":"2025-01-03T07:39:41","slug":"foreign-exchange-market-mcq","status":"publish","type":"post","link":"https:\/\/scholarsclasses.com\/blog\/foreign-exchange-market-mcq\/","title":{"rendered":"50+ Foreign Exchange Market MCQ&#8217;s | (Free Resource) Business Economics"},"content":{"rendered":"\n<h2 class=\"wp-block-heading has-text-align-center\">Foreign Exchange Market MCQ<\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"576\" data-src=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2022\/04\/Foreign-Exchange-Market-MCQ-1024x576.webp\" alt=\"Foreign Exchange Market MCQ\" class=\"wp-image-17539 lazyload\" title=\"\" data-srcset=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2022\/04\/Foreign-Exchange-Market-MCQ-1024x576.webp 1024w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2022\/04\/Foreign-Exchange-Market-MCQ-300x169.webp 300w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2022\/04\/Foreign-Exchange-Market-MCQ-768x432.webp 768w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2022\/04\/Foreign-Exchange-Market-MCQ-1536x864.webp 1536w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2022\/04\/Foreign-Exchange-Market-MCQ.webp 1920w\" data-sizes=\"(max-width: 1024px) 100vw, 1024px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1024px; --smush-placeholder-aspect-ratio: 1024\/576;\" \/><figcaption class=\"wp-element-caption\">Foreign Exchange Market MCQ<\/figcaption><\/figure>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/business-economics-mcq\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/business-economics-mcq\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>MCQs on other topics of Business Economics <\/strong><\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.icsi.edu\/media\/webmodules\/modelquestionpaper\/CMA-MCQ%20100.pdf\" data-type=\"URL\" data-id=\"https:\/\/www.icsi.edu\/media\/webmodules\/modelquestionpaper\/CMA-MCQ%20100.pdf\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Cost Accounting MCQs pdf <\/strong><\/a><\/li>\n<\/ul>\n\n\n\n<p><strong>1. Hedging refers to _______ . <br><\/strong>a) the covering of a foreign exchange risk<br>b) foreign exchange speculation, the acceptance of foreign exchange risk<br>c) interest rate arbitrage<\/p>\n\n\n\n<p><strong>2. Under flexible exchange rate system, exchange rate is determined by _______ . <br><\/strong>a) the demand and supply of foreign exchange<br>b) Central Bank intervention<br>c) the price of gold<br>d) none of the above<\/p>\n\n\n\n<p><strong>3. Functions of forex market include ________ . <br><\/strong>a) all the below<br>b) provision of facilities for funds transfer<br>c) trading, short term finance<\/p>\n\n\n\n<p><strong>4. Which of the following is not a function of the foreign exchange market?<br><\/strong>a) Import and export of goods and services<br>b) transfer of purchasing power<br>c) coverage of risk<br>d) provision of credit instruments and credit<\/p>\n\n\n\n<p><strong>5. _______ helps to equalize the exchange rate in all part of the foreign exchange market. <br><\/strong>a) speculation<br>b) interest arbitrage<br>c) hedging<\/p>\n\n\n\n<p><strong>6. Forward market in foreign exchange refers to _______ market. <br><\/strong>a) Short and long run<br>b) a short run, a long run<br>c) a spot<\/p>\n\n\n\n<p><strong>7. Speculation in foreign exchange market refers to _______ . <br><\/strong>a) accepting risk to make profits<br>b) hedging<br>c) interest arbitrage<br>d) none of the above<\/p>\n\n\n\n<p><strong>8. India adopts _________ exchange rate system. <br><\/strong>a) managed flexibility<br>b) fixed exchange rate<br>c) flexible exchange rate<br>d) none of the above<\/p>\n\n\n\n<p><strong>9. The rate at which the foreign currency is exchanged at current rate is called ______ rate. <br><\/strong>a) spot<br>b) forward<br>c) arbitrage<br>d) none of the above<\/p>\n\n\n\n<p><strong>10. Vehicle currency is ________ . <br><\/strong>a) a standard internationally accepted currency<br>b) a currency of IMF<br>c) a currency issued by RBI<br>d) none of the above<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td class=\"has-text-align-center\" data-align=\"center\"><strong>Answers:<\/strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\">1)the covering of a foreign exchange risk  2)the demand and supply of foreign exchange  3)all the below<\/mark> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\"> 4)Import and export of goods and services<\/mark> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\"> 5)speculation  6)Short and long run  7)accepting risk to make profits   8)managed flexibility  9)spot<\/mark> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\"> 10)a standard internationally accepted currency<\/mark><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>11. Arbitrage refers to purchase and sale of an asset _________ . <br><\/strong>a) at low price in one market and its simultaneous sale at higher price in another market<br>b) at high price in one market and its sale at lower price in another market<br>c) purchase and sale at the same price<br>d) all of the above<\/p>\n\n\n\n<p><strong>12. _______ is not included in the wholesale foreign exchange market.<br><\/strong>a) small investor<br>b) RBI<br>c) FII<br>d) Commercial Bank<\/p>\n\n\n\n<p><strong>13. Speculators deal in _________ . <br><\/strong>a) spot and forward exchange rate<br>b) only spot exchange rate<br>c) only forward exchange rate<br>d) none of the above<\/p>\n\n\n\n<p><strong>14. Hedgers enter foreign exchange market to ________ . <br><\/strong>a) cover risk<br>b) earn margin<br>c) speculate<br>d) none of the above<\/p>\n\n\n\n<p><strong>15. Foreign exchange market is a place where ________ . <br><\/strong>a) various foreign currencies are exchanged<br>b) only foreign tourists exchange currencies<br>c) only exporters convert the foreign currencies<br>d)  only importers convert the foreign currencies<\/p>\n\n\n\n<p><strong>16. Flexible exchange creates ______ in importers and exporters.<br><\/strong>a) uncertainty<br>b) confidence<br>c) safety<br>d) none of the above<\/p>\n\n\n\n<p><strong>17. ________ is not a defect of flexible exchange rate. <br><\/strong>a) Stability in international monetary system<br>b) speculation<br>c) structural unemployment<br>d) discourages investments<\/p>\n\n\n\n<p><strong>18. Under _________ exchange rate system, the exchange rate is determined by market forces. <br><\/strong>a) flexible<br>b) fixed<br>c) managed float<br>d) all of the above<\/p>\n\n\n\n<p><strong>19. Under ________ exchange rate system, the central bank of a nation intervenes in exchange rate determination. <br><\/strong>a) managed float<br>b) fixed <br>c) flexible<br>d) none of the above<\/p>\n\n\n\n<p><strong>20. Fixed exchange rate system, the exchange rate was ________ . <br><\/strong>a) stable<br>b) unstable<br>c) fluctuating<br>d) all of the above<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td class=\"has-text-align-center\" data-align=\"center\"><strong>Answers:<\/strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\">11)at low price in one market and its simultaneous sale at higher price in another market  12)small investor  13)spot and forward exchange rate 14)cover risk  15)various foreign currencies are exchanged  16)uncertainty  17)Stability in international monetary system  18)flexible  19)managed float  20)stable<\/mark><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>21. The modern foreign exchange market operates under _______ rate system. <br><\/strong>a) floating<br>b) fixed<br>c) highly managed float<br>d) all of the above<\/p>\n\n\n\n<p><strong>22. In exchange rate determination, the first currency in the currency pair is called _______ currency. <br><\/strong>a) base<br>b) soft<br>c) negotiable<br>d) hard<\/p>\n\n\n\n<p><strong>23. __________ is a feature of foreign exchange market. <br><\/strong>a) operates 24 hours for 5 day in a week<br>b) operates 24 hours for all 7 days in a week<br>d) operates365 days in a year<br>d)  none of the above<\/p>\n\n\n\n<p><strong>24. ________ is not a feature of foreign exchange market. <br><\/strong>a) Limited Geographical Coverage<br>b) Highly Liquid Market<br>c) Huge Value Market<br>d) None of the above<\/p>\n\n\n\n<p><strong>25. _________ enables an investor to earn high returns while minimizing capital risks. <br><\/strong>a) Leverage<br>b) Liquidity<br>c) Reserves<br>d) all of the above<\/p>\n\n\n\n<p><strong>26. Transactions in foreign exchange market have become quicker due to _________ . <br><\/strong>a) advanced technology<br>b) Government Initiatives<br>c) IMF<br>d) World Bank<\/p>\n\n\n\n<p><strong>27. Society for Worldwide Interbank Financial Telecommunications(SWIFT) is a ________ communication network that facilitates 24-hour secure international exchange of payment instructions between banks,central banks, multinational corporations, and major securities firms.<br><\/strong>a) Global<br>b) Local<br>c) National<br>d) None of the above<\/p>\n\n\n\n<p><strong>28. The function of foreign exchange market that helps in clearing international transactions is known as _______ . <br><\/strong>a) transfer<br>b) credit<br>c) hedging<br>d) speculation<\/p>\n\n\n\n<p><strong>29. Provision of documentary bills of exchange in international payments is an example of ________ function.<br><\/strong>a) creation of credit<br>b) transfer<br>c) speculation<br>d) hedging<\/p>\n\n\n\n<p><strong>30. The function of foreign exchange market, which is concerned with fixing of forward exchange rates is known as __________ . <br><\/strong>a) Hedging<br>b) speculation<br>c) arbitrage<br>d) transfer)<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td class=\"has-text-align-center\" data-align=\"center\"><strong>Answers:<\/strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\">21)floating  22)base  23)operates 24 hours for 5 day in a week<\/mark> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\"> 24)Limited Geographical Coverage  25)Leverage  26)advanced technology  27)Global   28)transfer  29)creation of credit  30)Hedging<\/mark><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>31. The foreign exchange rate of a nation is influenced by ________ .<br><\/strong>a) all of the below<br>b) speculators<br>c) hedgers<br>d)  arbitrators<\/p>\n\n\n\n<p><strong>32. The foreign exchange rate of a nation is influenced by _________ .<br><\/strong>a) all of the below<br>b) BoP<br>c) Interest rate<br>d) speculation<\/p>\n\n\n\n<p><strong>33. _______ is not a feature of spot exchange rate. <br><\/strong>a) Clearing of payment takes place fairly long period<br>b) demand and supply of foreign currency determines the rate<br>c) current exchange rate<br>d) all of the above<\/p>\n\n\n\n<p><strong>34. The demand for foreign currency arises due to _______ . <br><\/strong>a) imports<br>b) exports<br>c) investments from abroad<br>d) none of the above<\/p>\n\n\n\n<p><strong>35. The supply of foreign currency is on account of _______ . <br><\/strong>a) exports<br>b) imports<br>c) investments abroad<\/p>\n\n\n\n<p><strong>36. _______ rate is the rate at which a nation\u2019s currency is exchanged for some other nation\u2019s currency.<br><\/strong>a) Exchange<br>b) Transfer<br>c) Negotiating<br>d) All of the above<\/p>\n\n\n\n<p><strong>37. The demand curve for foreign exchange slopes ________ indicating that when the exchange rate of foreign currency falls, the demand for it increases. <br><\/strong>a) downwards<br>b) upwards<br>c) sideways<br>d) none of the above<\/p>\n\n\n\n<p><strong>38. The supply curve for foreign currency slopes _________ indicating that when the exchange rate of foreign currency increases, the supply of it increases. <br><\/strong>a) upwards<br>b) downwards<br>c) sideways<br>d) all of the above<\/p>\n\n\n\n<p><strong>39. If there is more demand for foreign currency, the foreign currency will _______ . <br><\/strong>a) appreciate<br>b) depreciate<br>c) nil effect<br>d) none of the above<\/p>\n\n\n\n<p><strong>40.&nbsp;When the demand curve for foreign currency, intersects the supply curve, we get _________ exchange rate.<br><\/strong>a) equilibrium<br>b) premium<br>c) discount<br>d) par<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td class=\"has-text-align-center\" data-align=\"center\"><strong>Answers:<\/strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\">31)all of the below  32)all of the below  33)Clearing of payment takes place fairly long period<\/mark> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\"> 34)imports  35)exports<\/mark> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\"> 36)Exchange<\/mark> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\"> 37)downwards  38)upwards  39)appreciate<\/mark> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\"> 40)equilibrium  <\/mark><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>41. Theory of purchasing power parity __________ . <br><\/strong>a) neglects capital account transactions<br>b) includes transportation cost<br>c) includes prices of non\u0002traded goods<br>d) applies only in short run<\/p>\n\n\n\n<p><strong>42. Purchasing Power Parity Theory was propounded by _________ . <br><\/strong>a) Gustav Cassel<br>b) David Ricardo<br>c) Adam Smith<br>d) None of the above<\/p>\n\n\n\n<p><strong>43. Purchase of foreign currency by the monetary authority _________ the appreciation of domestic currency. <br><\/strong>a) prevents<br>b) aggravates<br>c) leads to<\/p>\n\n\n\n<p><strong>44. _________ is monetary authority\u2019s intervention to prevent forex fluctuations through M Policy instruments. <br><\/strong>a) Sterilized Intervention<br>b) bank rate<br>c) open market operations<br>d) Un-sterilized intervention<\/p>\n\n\n\n<p><strong>45. ________ is monetary authority\u2019s Intervention by purchase\/sale of foreign current to prevent fluctuations in foreign exchange.<br><\/strong>a) Unsterilised Intervention<br>b) Sterilized intervention<br>c) bank rate policy<\/p>\n\n\n\n<p><strong>46. ________ of goods results in demand for foreign currency. <br><\/strong>a) Import<br>b) export<br>c) sale in domestic market<br>d) none of above<\/p>\n\n\n\n<p><strong>47. _________ results in supply of foreign currency. <br><\/strong>a) Unilateral receipts<br>b) unilateral payments<br>c) investment abroad<br>d) none of above<\/p>\n\n\n\n<p><strong>48. Equilibrium exchange rate is determined when ________ . <br><\/strong>a) the demand curve for foreign currency intersects with supply curve<br>b) demand curve shifts upwards<br>c) supply curves slopes downwards<br>d) none of the above<\/p>\n\n\n\n<p><strong>49. Exchange rate between two currencies is based on ________ .<br><\/strong>a) purchasing power of two currencies<br>b) economic development of the two nations<br>c) political stability in the two countries<br>d) none of the above<\/p>\n\n\n\n<p><strong>50. Critics of Purchasing Power Parity theory state that it has limited application for _______ countries. <br><\/strong>a) Large<br>b) small<br>c) medium-sized<br>d) none of the above<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td class=\"has-text-align-center\" data-align=\"center\"><strong>Answers:<\/strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\">41)neglects capital account transactions  42)Gustav Cassel  43)prevents<\/mark> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\"> 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<\/mark><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>51. PPP Theory considers that goods in different countries are _______ .<br><\/strong>a) Identical<br>b) differential<br>c) superior<br>d) non of the above<\/p>\n\n\n\n<p><strong>52. PPP Theory ignores capital flows on account of _________ . <br><\/strong>a) capital account<br>b) trade account<br>c) current account<br>d) none of the above<\/p>\n\n\n\n<p><strong>53. There is a _______ relationship between demand for foreign currency and the exchange rate. <br><\/strong>a) inverse<br>b) direct<br>c) straight<br>d) positive<\/p>\n\n\n\n<p><strong>54. There is a _______ relationship between supply of foreign currency and the exchange rate.<br><\/strong>a) direct<br>b) inverse<br>c) negative<br>d) indirect<\/p>\n\n\n\n<p><strong>55. LERMS was introduced in India in ________ . <br><\/strong>a) 1992<br>b) 2000<br>c) 2002<br>d) 2012<\/p>\n\n\n\n<p><strong>56. Under managed float, the central bank of a nation intervenes to ________ foreign currency. <br><\/strong>a) purchase and sell<br>b) only purchase<br>c) only sale<br>d) none of the above<\/p>\n\n\n\n<p><strong>57. Under flexible exchange rate system, the exchange rate is determined by ________ . <br><\/strong>a) market forces<br>b) central bank<br>c) commercial banks<br>d) none of the above<\/p>\n\n\n\n<p><strong>58. Under IMF, the exchange rate system was ______ . <br><\/strong>a) gold standard<br>b) currency board system<br>c) dollarization<br>d) none of the above)<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td class=\"has-text-align-center\" data-align=\"center\"><strong>Answers:<\/strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\">51)Identical  52)capital account  53)inverse<\/mark> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-red-color\"> 54)direct  55)1992  56)purchase and sell  57)market forces   58)gold standard<\/mark><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<div class=\"video-container\"><iframe title=\"#5 TYBCOM SEM 6 Economics MCQ | Unit 4 - Foreign Exchange Market MCQ (Part 1)\" width=\"500\" height=\"281\" data-src=\"https:\/\/www.youtube.com\/embed\/vPNym1bYJZY?feature=oembed&#038;wmode=opaque\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" class=\"lazyload\" data-load-mode=\"1\"><\/iframe><\/div>\n<\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>&#46;&#46;&#46;<\/p>\n","protected":false},"author":1,"featured_media":17539,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2,7],"tags":[4795],"class_list":["post-17469","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bcom","category-degree-college","tag-foreign-exchange-market-mcq"],"_links":{"self":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/17469","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/comments?post=17469"}],"version-history":[{"count":4,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/17469\/revisions"}],"predecessor-version":[{"id":36260,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/17469\/revisions\/36260"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media\/17539"}],"wp:attachment":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media?parent=17469"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/categories?post=17469"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/tags?post=17469"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}