One function of the foreign exchange market is to provide some insurance against

Question

One function of the foreign exchange market is to provide some insurance against the risks that changes in exchange rates, commonly referred to as A) foreign market hazard. B) global jeopardy C) commerce uncertainty D) foreign exchange risk 20. arise from A US. bond purchased by the Chinese government will see its market price fall if from this, we ean expect the yield to A) there is inflation, rise B) demand for bonds rises, rise 21. and C) there is capital flight from U.S. assets, fall D) demand for bonds falls, rise dollar rises against the Yen, Japanese investors would find that the yen denominated value of their American bonds would A) be inverse to the yield B) fall C) stay the same D) rise 23. According to the textbook, by entering intogroups of countries aim to reduce trade barriers more rapidly than can be achieved under the WTO. A) regional agreements B) synergistic agreements C) global agreements D) transnational agreements A country can attempt to greatly improve GDP simply by changing the relative value of its currency. If this is the case, then it must want to be a(n) 24. To accomplish this, it would require a currency as compared to its trading partners. A) currency provider, nominal value B) import led economy, higher value C) export led economy, lower value D) third world economy, the gold standard for a given country. 25, A quickly falling currency value could foreshadow A) B) C) D) E) inflation and more competitive export pricing deflation and no export pricing effect an increase in domestic demand for foreign made products capital flight both A and D are correct

Explanation / Answer

20) foreign exchange risk

The risk involved in foreign exchange market due to fluctuations in exchange rate is known as foreign exchange risk.

21) demand for bond fall, rise

When demand falls it's price falls. Yeild is inversely proportional to price. When price falls yield rises.

22) fall

When Japanese yen depreciates, it gets lower value for every yen exchanged. Thus denominated value falls.

23) regional agreements

Regional agreements are the agreements between countries that include free trade and custom unions. This reduces trade barriers.

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