Question

1,

Intervention in the foreign exchange market is the process of

a. commercial banks in different countries coordinating efforts in order to stabilize one or more currencies.

b. the government of a country prohibiting transactions in one or more currencies.

c. a central bank buying or selling its currency in order to influence its value.

2,

You noticed that when stocks declined substantially [February 20 to March 23], long term government bonds increased in value substantially.

a. Neither statement is true.

b. Both statements are true.

c. This is an example of negative correlation.

d. This is an example of why adding long term government bonds to a stock portfolio lowers total risk.

3,

Japan has experienced large trade surpluses. Japanese investors have responded to this by

a. lobbying the U.S. government to depreciate its currency.

b. lobbying the Japanese government to allow the yen to appreciate.

c. investing heavily in U.S. and other foreign financial markets.

d. liquidating their positions in stocks to buy dollar-denominated bonds.

4,

During the period of the classical gold standard (1875-1914) there were

a. stable exchange rates.

b. volatile exchange rates.

c. No need for exchange rates because of limited trade.

5,

How was the World Bank created?

a. As a result of the Bretton Woods agreement

b. As a result of the Maastrich Treaty

c. As a result of establishment of the Federal Reserve System

d. As a result of the formation of the European Union

Answer 1

-1 : ANSWER : (C) A Central Bank Buying Or Selling Its Currency In Order To Influence Its Value.

=>Explanation :

In Order To Influence currency Value A Central Bank buy Or sell Countries Currency It Is Called Currency Intervention.When Central Bank Buy Its Own Currency It Means They Reduce Currency From Foreign Market So It Leads To Increase In Export it Makes Domestic Goods Cheaper For Foreign Countries So They Import It Form Domestic Country

Q-2 : ANSWER :- (B) Both Statements Are True

=> Explanation :-

Stock Provide More Return Than Government Stock But Government Stock Are More Secure Than Stock So When Stock Declined Substantially Government Bonds Value Increase Because Investors attract It to Purchase As It Is More secure Than Stocks So When Stock value Increase government Bonds Decrease And When Stock Value Decrease Government Bonds Value Increase

Q-3 ANSWER :- (C) Investing Heavily In U.S. And Other Foreign Financial Markets

=> Explanation :-

Japan Has large Trade Surpluses, Japanese Investors Have Responded To This By Investing Heavily In U S And Other Foreign Financial Markets.It Provide Large Trade Market For The Country And Boost Export. Also It Makes Currency Strong And Lots of Investment Options In Foreign Market

Q-4 : ANSWER :-(A) Stable Exchange Rates

=> Answer :-

In Gold Standard Exchange Rate Value Decided According To Gold. it Reduce Exchange rate risk And Make it Stable For Both of The Countries. it Failed Because Gold Supply Increase Very Slowly And There Are Some Other Disadvantage Of It So In 1933 Gold Standard Abounded By All Countries Now Gold standard Did Not Exist In All Over The World.

Q-5 : Answer :- (A) As A Result Of Bretton Woods Agreement

=> Explanation :-

Before World War ll In 1944 United Nations Monetary And Financial Conference In Bretton Woods Established World Bank. it Is Established By The Bretton Woods Agreement And Start Work From 1946. It Established to Provide Help To Middle And Lower Developed Country. It also Provide Funds for Sum Countries For Development.