The Foreign Exchange Market and Exchange Rates (Edexcel A-Level Economics A): Quizzes
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10 questions from this quiz
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Practise the questions
10 questions from this quiz
In the foreign exchange market, what is the 'price' that is determined by supply and demand?
In the foreign exchange market, what is the 'price' that is determined by supply and demand?
The exchange rate between currencies
Why does the demand curve for a currency slope downward in the foreign exchange market?
Why does the demand curve for a currency slope downward in the foreign exchange market?
Low rate makes goods cheap; high demand
What is a fixed exchange rate system?
What is a fixed exchange rate system?
Govt maintains currency at specified level
When did the Dollar Standard (Bretton Woods system) operate?
When did the Dollar Standard (Bretton Woods system) operate?
Post-WWII until early 1970s
What are foreign exchange reserves used for under a fixed exchange rate system?
What are foreign exchange reserves used for under a fixed exchange rate system?
To meet mismatch between currency demand/supply
What is the J-curve effect following a devaluation?
What is the J-curve effect following a devaluation?
Current account worsens then improves
What does the Marshall-Lerner condition state about devaluation?
What does the Marshall-Lerner condition state about devaluation?
Elasticities sum must exceed 1 for success
What is the difference between devaluation and depreciation?
What is the difference between devaluation and depreciation?
Devaluation: fixed system; depreciation: floating
What is 'hot money' in the context of foreign exchange markets?
What is 'hot money' in the context of foreign exchange markets?
Funds moved globally seeking best returns
What is a key constraint of a fixed exchange rate system on macroeconomic policy?
What is a key constraint of a fixed exchange rate system on macroeconomic policy?
Cannot pursue independent monetary policy