Question

13. Once a country decides to allow a free flow of capital has to a) Fixed exchange rate regime b) Independent monetary policy c) Independent monetary policy or fixed exchange rate regime d) Fixed exchange rate regime and independent monetary policy 14. The Japanese economy experienced a deep recession in the 1990s. The central bank of decreased interest rates to zero to tackle economic slowdown but it was not enough to get the country out of the recession. The government attempted to stimulate the economy by increasing Japan's exports by selling Japanese Yen in the Forex in order to weaken the Yen against other foreign exchanges. The action of the government is more aligned with which of the following exchange rate regimes. a) hard peg b) soft peg c) free floating d) managed floating 15. You read the following report on Reuters: "the EUR/USD exchange rate has moved from 1.1560 to 1.1575". it means that: a) The exchange rate has moved from €1.1560/$ to €1.1575/$ b) The exchange rate has moved from $1.1560/€ to $1.1575/€ c) The exchange rate has moved from €1.1560/£ to €1.1575/£ d) Cannot tell from the information 16. If the bid rate is given as USD/EUR 1.270293 and the ask rate is USD/EUR 1.270294, then which of the following statements is correct? a. A person who wishes to buy euros for dollars will receive a rate of EUR/USD 1.270293 b. A person who wishes to sell dollars for euros will receive a rate of EUR/USD 1.270293. c. A person who wishes to sell euros for dollars will receive a rate of EUR/USD 1.270294. d. A person who wishes to buy dollars for euros will receive a rate of EUR/USD 1.270293.

Answer 1

13) b - independent monetary policy

14) C- free floating

15) A- The exchange rate has moved from€1.1560/$ to €1.1575/$

16) B- sell dollors for euros @ EUR/USD 1.270293