World Trade Quiz 1

1.0 What determines foreign currency exchange rates in open markets?

A) Government regulations
B) Supply and demand
C) Central bank decisions
D) Historical trends
2.0 Which forces control exchange rates?
A) Demand and supply
B) Political stability
C) Currency reserves
D) Trade deficits
3.0 The law of demand states that:
A) Quantity demanded increases as price rises
B) Quantity demanded falls as price rises
C) Quantity demanded remains constant regardless of price
D) Quantity demanded is unrelated to price
4.0 What happens to currency demand when a country experiences a trade surplus?
A) Currency demand increases
B) Currency demand decreases
C) Currency demand remains unchanged
D) Currency demand becomes volatile
5.0 A trade deficit occurs when:
A) A country exports more than it imports
B) A country imports more than it exports
C) A country has balanced trade
D) A country’s currency appreciates

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6.0 How does a trade deficit impact currency exchange rates?
A) It strengthens the country’s currency
B) It weakens the country’s currency
C) It has no effect on currency rates
D) It leads to currency stability
7.0 The labor demand curve shifts down for an import good because:
A) World prices are higher than domestic prices
B) World prices are lower than domestic prices
C) Labor demand increases due to trade
D) Labor demand remains constant
8.0 Exchange rates between currencies are influenced by:
A) Government policies
B) Consumer preferences
C) Trade balances
D) Weather conditions
9.0 What is the relationship between trade deficits and currency demand?
A) Trade deficits increase currency demand
B) Trade deficits decrease currency demand
C) Trade deficits have no impact on currency demand
D) Trade deficits lead to currency appreciation
10.0 Why do exchange rates fluctuate?
A) Political events
B) Supply and demand imbalances
C) Central bank interventions
D) All of the above

11. What is the primary factor that influences the value of a country’s currency in the foreign exchange
market?
A) Government debt

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B) Trade balance
C) Population size
D) Cultural heritage
12. When a country’s currency appreciates, what impact does it have on imports and exports?
A) Imports become cheaper, exports become more expensive
B) Imports become more expensive, exports become cheaper
C) Both imports and exports become cheaper
D) Both imports and exports become more expensive
13. Which of the following scenarios would likely lead to an increase in the demand for a country’s
currency?
A) A decrease in interest rates
B) A rise in exports
C) A budget deficit
D) Political instability
14. What is the term for the difference between a country’s exports and imports?
A) Trade balance
B) Trade surplus
C) Trade deficit
D) Trade equilibrium
15. If a country experiences a trade surplus, what is the likely impact on its currency value?
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

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D) Stock market performance
17. What happens to the supply of a country’s currency when its central bank engages in open market
operations to purchase government bonds?
A) Supply increases
B) Supply decreases
C) Supply remains constant
D) Supply becomes unpredictable
18. A country with a high inflation rate is likely to experience:
A) A stronger currency
B) A weaker currency
C) No impact on currency value
D) Fluctuating currency value
19. Which of the following is an example of a non-tariff barrier to trade?
A) Import quotas
B) Export subsidies
C) Currency exchange rates
D) Embargoes
20. What is the primary purpose of a central bank’s intervention in the foreign exchange market?
A) To stabilize exchange rates
B) To maximize profits
C) To regulate stock markets
D) To control inflation