Question

True or False?

1. The demand for foreign goods implies supplying the domestic currency.

2. If a nation's currency rises in value, foreigners can purchase more of that nation's output.

3. The devaluation of one currency implies a revaluation of other currencies.

4. If the American dollar is devalued, American goods are more expensive to people holding dollars.

5. The International Monetary Fund may lend currency reserves to a nation with a deficit in its merchandise trade balance.

6. The political climate abroad will affect the risk associated with foreign investments.

Answer 1

1. The demand for foreign goods implies supplying the domestic currency.

FALSE--- The demand for foreign goods implies supplying that foreign currency from where goods are imported.

2. If a nation's currency rises in value, foreigners can purchase more of that nation's output.

FALSE--- Only lesser quantity can be bought for the importing foreign currency needs to shell out more of their money in exchange.

3. The devaluation of one currency implies a revaluation of other currencies.

TRUE--Devalution ,ie. Lowering the excahnge rate of one currency , means revauation,ie. Increasing the exchange rate of other currencies, in relation to the former currency.

4. If the American dollar is devalued, American goods are more expensive to people holding dollars.

FALSE--If the American dollar is devalued, American goods are more CHEAPER to people holding dollars---you can get more goods for the same quantum of money .

5. The International Monetary Fund may lend currency reserves to a nation with a deficit in its merchandise trade balance.

TRUE-- The IMF lends temporary financing to member-nations with deficit trade balances, monitors their use & helps to overcome them at the earliest.

6. The political climate abroad will affect the risk associated with foreign investments.

TRUE-- As all investments have to operate as per the rules & regulations framed by that government.Those in power , in that country have the authority to put in place or revise the rules and framework of operations for corporates in that country.