Foreign Exchange Rate
Economics ⇒ International Trade and Globalisation
Foreign Exchange Rate starts at 11 and continues till grade 12.
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See sample questions for grade 11
A country has a fixed exchange rate system. Who is responsible for maintaining the exchange rate at the fixed level?
Define 'spot exchange rate'.
Describe the role of central banks in the foreign exchange market.
Explain how interest rate differentials between two countries can affect their exchange rates.
Explain the concept of 'currency convertibility'.
Explain the difference between appreciation and depreciation of a currency.
If the exchange rate of the Indian rupee moves from Rs. 65 per US dollar to Rs. 70 per US dollar, calculate the percentage depreciation of the rupee.
Suppose the spot rate for 1 USD is Rs. 74 and the forward rate for 1 USD after 3 months is Rs. 76. Is the rupee expected to appreciate or depreciate?
If the Indian rupee appreciates against the US dollar, what will be the effect on Indian exports? (1) Exports will become cheaper, (2) Exports will become costlier, (3) No effect, (4) Exports will increase automatically
Which of the following best describes a flexible exchange rate system? (1) The government fixes the exchange rate, (2) The exchange rate is determined by market forces, (3) The exchange rate is fixed but can be changed by the government, (4) The exchange rate is determined by international organizations
Which of the following is a consequence of currency depreciation? (1) Imports become cheaper, (2) Exports become cheaper, (3) Exports become costlier, (4) No effect on trade
Which of the following is a reason for a country to adopt a fixed exchange rate system? (1) To allow currency fluctuations, (2) To promote exchange rate stability, (3) To encourage speculation, (4) To discourage trade
Fill in the blank: The difference between the buying and selling rate of a currency is called the ________.
Fill in the blank: The foreign exchange market is also known as the ________ market.
Fill in the blank: The rate at which a currency can be exchanged for another currency at a future date is called the ________ exchange rate.
Fill in the blank: The system in which the value of a currency is determined by the government is called the ________ exchange rate system.
State whether the following is true or false: The Reserve Bank of India can influence the exchange rate by buying or selling foreign currencies.
State whether the following is true or false: Under a flexible exchange rate system, the central bank never intervenes in the foreign exchange market.
State whether the following statement is true or false: Devaluation is a deliberate downward adjustment of the value of a country's currency.
True or False: A rise in the domestic price level (inflation) tends to depreciate the domestic currency in the foreign exchange market.
