Question 1

Direct intervention for currency valuation involves limiting the ability to exchange domestic currency for foreign currency.

Accepted Answer

A) True 
 B)False

Question 2

Technical analysts,traditionally referred to as chartists,focus on fundamental data to determine past trends that are expected to continue into the future.

Accepted Answer

A) True 
 B)False

Question 3

A currency board is:

Accepted Answer

A)   a structure, rather than a mere commitment, to limiting the growth of the money supply in the economy.
B)   a recipe for conservative and prudent financial management.
C)   designed to eliminate the power of politicians to exercise judgment by relying on an automatic and unbendable rule.
D)   all of the aboveE) A) and B)
F) C) and D)

Question 4

Foreign exchange forecasting can be either long-term,or short-term in duration.Compare and contrast the motivation for and the techniques a forecaster might use for each of the time periods.

Accepted Answer

Short-run forecasts are usually more tac...

Question 5

Which of the following is NOT a motivation for a government or central bank to manipulate domestic currency valuation?

Accepted Answer

A)   fight inflation
B)   slow too rapid economic growth
C)   spur too slow economic growth
D)   All of the above are motivations for the government or central bank to manipulate currency values.E) All of the above
F) A) and D)

Question 6

Which of the following is NOT a technique used by governments or central banks to impact domestic currency valuation?

Accepted Answer

A)   Indirect Intervention
B)   Direct Intervention
C)   Capital Controls
D)   All of the above are techniques used to control currency valuation.E) B) and D)
F) A) and B)

Question 7

In 1991,Argentina adopted a currency board (the Argentine peso had been pegged to the U.S.dollar at a one-to-one rate of exchange)to fight hyperinflation.This currency board lasted for a decade until the economic crisis of 2001.Discuss : 1)the pros and cons of a currency board policy,2)the crisis condition of the Argentina's economy by 2001,and 3)the lessons to be drawn from the the Argentina story.

Accepted Answer

Under a currency board,the central bank may increase the money supply in the banking system only with increases in its holdings of hard currency reserves.By removing the ability of government to expand the rate of growth of the money supply,Argentina believed it was eliminating the source of inflation that had devastated its standard of living.It was both a recipe for conservative and prudent financial management,and a decision to eliminate the power of politicians,elected and unelected,to exercise judgment both good and bad.It was an automatic and unbendable rule.
This "cure" was a restrictive monetary policy that slowed economic growth.The country's unemployment rate rose to double-digit levels in 1994 and stayed there.The real GDP growth rate settled into recession in late 1998,and the economy continued to shrink through 2000.Argentine banks allowed depositors to hold their money in either pesos or dollars.This was intended to provide a market-based discipline to the banking and political systems,and to demonstrate the government's unwavering commitment to maintaining the peso's value parity with the dollar.Although intended to build confidence in the system,in the end it proved disastrous to the Argentine banking system.The 1998 recession proved to be unending.Three-and-a-half years later,Argentina was still in recession.By 2001,crisis conditions had revealed three very important underlying problems with Argentina's economy: 1)The Argentine peso was overvalued; 2)The currency board regime had eliminated monetary policy alternatives for macroeconomic policy; and 3)The Argentine government budget deficit was out of control.Inflation had not been eliminated,and the world's markets were watching.
As the unemployment rate grew higher,as poverty and social unrest grew government was faced with pressure to close the economic and social gaps.Government spending continued to increase,but tax receipts did not.Argentina turned to the international markets to aid in the financing of its government's deficit spending.The total foreign debt of the country began rising dramatically.As economic conditions continued to deteriorate,banks suffered increasing runs.The government,fearing that the increasing financial drain on banks would cause their collapse,closed the banks.
On Sunday,January 6,2002 the peso was devalued from 1.00 Argentine peso per U.S.dollar to 1.40.But the economic pain continued.On February 3,2002,the Argentine government announced that the peso would be floated and the government would no longer attempt to fix or manage its value to any specific level,allowing the market to find or set the exchange rate.

Question 8

The longer the time horizon of the technical analyst the more accurate the prediction of foreign exchange rates is likely to be.

Accepted Answer

A) True 
 B)False

Question 9

Leading up to the Russian currency collapse of 1998,Russia followed a currency policy of managed float that allowed their currency to slide daily at a 1.5% per month rate.

Accepted Answer

A) True 
 B)False

Question 10

The authors did NOT identify which of the following as a root of the Asian currency crisis?

Accepted Answer

A)   the collapse of some Asian currencies
B)   the rate of inflation in the United States
C)   corporate socialism
D)   banking stability and managementE) B) and C)
F) A) and D)

Question 11

The roots of the Asian currency crisis extended from a fundamental change in the economics of the region,the transition of many Asian nations from being net importers to net exporters.

Accepted Answer

A) True 
 B)False

Question 12

Most theories of technical analysis differentiate fair value from market value.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following was NOT an international currency crisis in the 1990s and early 2000s?

Accepted Answer

A)   the Asian Crisis
B)   the Canadian Crisis
C)   the Argentine Crisis
D)   All of the above were currency crises in the 1990s and 2000s.E) A) and B)
F) A) and C)

Question 14

Which of the following did NOT contribute to the Russian currency crisis of 1998?

Accepted Answer

A)   an accelerated flight of capital
B)   generally deteriorating economic conditions
C)   a surprisingly healthy government surplus that was neither funding internal investment nor external debt service
D)   all of the aboveE) B) and C)
F) A) and C)

Question 15

The ________ is the Argentine currency unit.

Accepted Answer

A)   peso
B)   dollar
C)   real
D)   pesetaE) A) and B)
F) A) and C)

Question 16

Examples of a business motivation for long-run exchange rate forecasts include all but which of the following?

Accepted Answer

A)   a major capital investment in a foreign country
B)   the desire to hedge a 90-day security
C)   a portfolio manager considering investing in foreign securities
D)   All of the above are examples of a business motivation for long-run exchange rate forecast.E) C) and D)
F) B) and D)

Question 17

The smaller and less liquid markets and currency markets frequently demonstrate behaviors that follow the principles outlined by the different schools of thought on exchange rate determination (parity conditions,balance of payments approach,and asset approach)relatively well in the medium to long term.

Accepted Answer

A) True 
 B)False  False

Question 18

The International Monetary Fund,as one of its basic principles (Article IV),encourages members to pursue "currency manipulation" to gain competitive advantages over other members as opposed to engaging in military action to achieve the same advantage.

Accepted Answer

A) True 
 B)False  False

Question 19

________ is the alteration of economic or financial fundamentals that are thought to be drivers of capital to flow in and out of specific currencies.

Accepted Answer

A)   Indirect Intervention
B)   Direct Intervention
C)   Foreign Direct Investment
D)   Capital ControlsE) A) and C)
F) B) and C)

Question 20

It is safe to say that most determinants of the spot exchange rate are also affected by changes in the spot rate.i.e.,they are linked AND mutually determined.

Accepted Answer

A) True 
 B)False

Exam 9: Foreign Exchange Rate Determination

Direct intervention for currency valuation involves limiting the ability to exchange domestic currency for foreign currency.

Correct Answer
verified

Technical analysts,traditionally referred to as chartists,focus on fundamental data to determine past trends that are expected to continue into the future.

Correct Answer
verified

A currency board is:

Correct Answer
verified

Foreign exchange forecasting can be either long-term,or short-term in duration.Compare and contrast the motivation for and the techniques a forecaster might use for each of the time periods.

Correct Answer
verified
Short-run forecasts are usually more tac...
View Answer

Which of the following is NOT a motivation for a government or central bank to manipulate domestic currency valuation?

Correct Answer
verified

Which of the following is NOT a technique used by governments or central banks to impact domestic currency valuation?

Correct Answer
verified

The longer the time horizon of the technical analyst the more accurate the prediction of foreign exchange rates is likely to be.

Correct Answer
verified

Leading up to the Russian currency collapse of 1998,Russia followed a currency policy of managed float that allowed their currency to slide daily at a 1.5% per month rate.

Correct Answer
verified

The authors did NOT identify which of the following as a root of the Asian currency crisis?

Correct Answer
verified

The roots of the Asian currency crisis extended from a fundamental change in the economics of the region,the transition of many Asian nations from being net importers to net exporters.

Correct Answer
verified

Most theories of technical analysis differentiate fair value from market value.

Correct Answer
verified

Which of the following was NOT an international currency crisis in the 1990s and early 2000s?

Correct Answer
verified

Which of the following did NOT contribute to the Russian currency crisis of 1998?

Correct Answer
verified

The ________ is the Argentine currency unit.

Correct Answer
verified

Examples of a business motivation for long-run exchange rate forecasts include all but which of the following?

Correct Answer
verified

Correct Answer
verified
False

The International Monetary Fund,as one of its basic principles (Article IV),encourages members to pursue "currency manipulation" to gain competitive advantages over other members as opposed to engaging in military action to achieve the same advantage.

Correct Answer
verified
False

________ is the alteration of economic or financial fundamentals that are thought to be drivers of capital to flow in and out of specific currencies.

Correct Answer
verified

It is safe to say that most determinants of the spot exchange rate are also affected by changes in the spot rate.i.e.,they are linked AND mutually determined.

Correct Answer
verified

Exam 9: Foreign Exchange Rate Determination

Direct intervention for currency valuation involves limiting the ability to exchange domestic currency for foreign currency.

Correct AnswerverifiedShow Answer

Technical analysts,traditionally referred to as chartists,focus on fundamental data to determine past trends that are expected to continue into the future.

Correct AnswerverifiedShow Answer

A currency board is:

Correct AnswerverifiedShow Answer

Foreign exchange forecasting can be either long-term,or short-term in duration.Compare and contrast the motivation for and the techniques a forecaster might use for each of the time periods.

Correct AnswerverifiedShort-run forecasts are usually more tac...View AnswerShow Answer

Which of the following is NOT a motivation for a government or central bank to manipulate domestic currency valuation?

Correct AnswerverifiedShow Answer

Which of the following is NOT a technique used by governments or central banks to impact domestic currency valuation?

Correct AnswerverifiedShow Answer

The longer the time horizon of the technical analyst the more accurate the prediction of foreign exchange rates is likely to be.

Correct AnswerverifiedShow Answer

Leading up to the Russian currency collapse of 1998,Russia followed a currency policy of managed float that allowed their currency to slide daily at a 1.5% per month rate.

Correct AnswerverifiedShow Answer

The authors did NOT identify which of the following as a root of the Asian currency crisis?

Correct AnswerverifiedShow Answer

The roots of the Asian currency crisis extended from a fundamental change in the economics of the region,the transition of many Asian nations from being net importers to net exporters.

Correct AnswerverifiedShow Answer

Most theories of technical analysis differentiate fair value from market value.

Correct AnswerverifiedShow Answer

Which of the following was NOT an international currency crisis in the 1990s and early 2000s?

Correct AnswerverifiedShow Answer

Which of the following did NOT contribute to the Russian currency crisis of 1998?

Correct AnswerverifiedShow Answer

The ________ is the Argentine currency unit.

Correct AnswerverifiedShow Answer

Examples of a business motivation for long-run exchange rate forecasts include all but which of the following?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedFalse

The International Monetary Fund,as one of its basic principles (Article IV),encourages members to pursue "currency manipulation" to gain competitive advantages over other members as opposed to engaging in military action to achieve the same advantage.

Correct AnswerverifiedFalse

________ is the alteration of economic or financial fundamentals that are thought to be drivers of capital to flow in and out of specific currencies.

Correct AnswerverifiedShow Answer

It is safe to say that most determinants of the spot exchange rate are also affected by changes in the spot rate.i.e.,they are linked AND mutually determined.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Short-run forecasts are usually more tac...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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False

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified