Exchange Rate Quiz by Shubhrata Shrestha | Jun 24, 2025 | 0 comments Exchange Rate Quiz 1. What is the main characteristic of a floating exchange rate system? A. Government fixes the currency value B. Currency is pegged to gold C. Currency value is determined by market forces D. Currency is stable over time None 2. What happens to the demand for a currency if interest rates rise in that country? A. Demand increases due to higher returns B. Demand decreases due to inflation C. Supply decreases as exports fall D. Currency is devalued by central bank None 3. What is the key feature of a fixed exchange rate system? A. Currency fluctuates freely B. Currency is pegged to another currency or a basket C. Central bank never intervenes D. Exchange rates depend on inflation only None 4. Which of the following best describes currency appreciation? A. Domestic currency strengthens in value against foreign currencies B. Domestic currency weakens due to inflation C. Currency is devalued by government D. Trade balance worsens immediately None 5. Which condition causes hot money inflow? A. Low inflation B. High interest rates C. High government spending D. Fixed exchange rate None 6. What is a disadvantage of fixed exchange rates? A. Excessive volatility B. Requires large currency reserves C. No need for monetary policy D. Floating values are unpredictable None 7. Which event led to the collapse of the Bretton Woods system? A. Eurozone crisis B. Great Depression C. Vietnam War and US inflation D. UK financial crash None 8. What does the J-Curve illustrate? A. Immediate benefit from currency appreciation B. Permanent fall in trade deficit after revaluation C. Short-term worsening and long-term improvement in trade balance after depreciation D. Increase in inflation due to interest rate cuts None 9. Under which condition does the reverse J-curve occur? A. After a recession B. After depreciation of currency C. In a floating exchange rate D. After currency appreciation or revaluation None 10. What is the effect of depreciation on imports and exports? A. Imports cheaper, exports expensive B. Imports and exports both increase C. Imports expensive, exports cheaper D. No change in trade balance None Time's up Submit a Comment Cancel replyYour email address will not be published. Required fields are marked *Comment * Name * Email * Website Save my name, email, and website in this browser for the next time I comment. Δ
