Quiz 1 Name

6.
How does a trade deficit impact currency

World Trade, Quiz #1 exchange rates?
Name: Class A) It strengthens the country’s currency

Schedule:
B) It weakens the country’s currency
Saturday,
12:00PM- C) It has no effect on currency rates
3:00PM
D) It leads to currency stability
1. What determines foreign currency exchange

7. The labor demand curve shifts down for an
rates in open markets?
import good because:
A) Government regulations
A) World prices are higher than domestic prices
B) Supply and demand
B) World prices are lower than domestic prices
C) Central bank decisions
C) Labor demand increases due to trade
D) Historical trends
D) Labor demand remains constant
2. Which forces control exchange rates?

8. Exchange rates between currencies are
A) Demand and supply influenced by:
B) Political stability A) Government policies
C) Currency reserves B) Consumer preferences
D) Trade deficits C) Trade balances
D) Weather conditions
3. The law of demand states that:
A) Quantity demanded increases as price rises 9. What is the relationship between trade deficits
and currency demand?
B) Quantity demanded falls as price rises
A) Trade deficits increase currency demand
C) Quantity demanded remains constant
regardless of price B) Trade deficits decrease currency demand
D) Quantity demanded is unrelated to price C) Trade deficits have no impact on currency

demand
D) Trade deficits lead to currency appreciation

4. What happens to currency demand when a
country experiences a trade surplus?
A) Currency demand increases 10. Why do exchange rates fluctuate?
B) Currency demand decreases A) Political events
C) Currency demand remains unchanged B) Supply and demand imbalances
D) Currency demand becomes volatile C) Central bank interventions
D) All of the above
5. A trade deficit occurs when:
A) A country exports more than it imports 11. What is the primary factor that influences
the value of a country’s currency in the foreign
B) A country imports more than it exports
exchange market?
C) A country has balanced trade
A) Government debt
D) A country’s currency appreciates
B) Trade balance
C) Population size
1
D) Cultural heritage 17. What happens to the supply of a country’s
currency when its central bank engages in open
market operations to purchase government
12. When a country’s currency appreciates, bonds?
what impact does it have on imports and
A) Supply increases
exports?
B) Supply decreases
A) Imports become cheaper, exports become
more expensive C) Supply remains constant
B) Imports become more expensive, exports D) Supply becomes unpredictable

become cheaper
C) Both imports and exports become cheaper

18. A country with a high inflation rate is likely
D) Both imports and exports become more to experience:
expensive
A) A stronger currency
B) A weaker currency
13. Which of the following scenarios would
C) No impact on currency value
likely lead to an increase in the demand for a
country’s currency? D) Fluctuating currency value
A) A decrease in interest rates
B) A rise in exports 19. Which of the following is an example of a

non-tariff barrier to trade?
C) A budget deficit
A) Import quotas
D) Political instability
B) Export subsidies
C) Currency exchange rates

14. What is the term for the difference between
a country’s exports and imports? D) Embargoes
A) Trade balance
B) Trade surplus 20. What is the primary purpose of a central

bank’s intervention in the foreign exchange
C) Trade deficit
market?
D) Trade equilibrium
A) To stabilize exchange rates
B) To maximize profits
15. If a country experiences a trade surplus,
C) To regulate stock markets
what is the likely impact on its currency value?
D) To control inflation
A) Currency appreciates
B) Currency depreciates
C) Currency remains unchanged
D) Currency becomes volatile
16. Which economic indicator reflects the

overall health of a country’s economy and
influences currency exchange rates?
A) Gross Domestic Product (GDP)
B) Consumer Price Index (CPI)
C) Unemployment rate
D) Stock market performance

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6.

How does a trade deficit impact currency

Name: Class A) It strengthens the country’s currency

1. What determines foreign currency exchange

2. Which forces control exchange rates?

B) Political stability A) Government policies

C) Currency reserves B) Consumer preferences

D) Trade deficits C) Trade balances

3. The law of demand states that:

D) Quantity demanded is unrelated to price C) Trade deficits have no impact on currency

D) Trade deficits lead to currency appreciation

A) Currency demand increases 10. Why do exchange rates fluctuate?

B) Currency demand decreases A) Political events

C) Currency demand remains unchanged B) Supply and demand imbalances

D) Currency demand becomes volatile C) Central bank interventions

D) All of the above

5. A trade deficit occurs when:

B) Imports become more expensive, exports D) Supply becomes unpredictable

C) Both imports and exports become cheaper

B) A rise in exports 19. Which of the following is an example of a

C) Currency exchange rates

B) Trade surplus 20. What is the primary purpose of a central

C) Currency remains unchanged

D) Currency becomes volatile

16. Which economic indicator reflects the

A) Gross Domestic Product (GDP)

B) Consumer Price Index (CPI)

D) Stock market performance

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