Foreign Exchange Market and Management of Exchange Rate MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Foreign Exchange Market and Management of Exchange Rate, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Foreign Exchange Market and Management of Exchange Rate MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Foreign Exchange Market and Management of Exchange Rate mcq questions that explore various aspects of Foreign Exchange Market and Management of Exchange Rate problems. Each MCQ is crafted to challenge your understanding of Foreign Exchange Market and Management of Exchange Rate principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Foreign Exchange Market and Management of Exchange Rate MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

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Foreign Exchange Market and Management of Exchange Rate MCQs | Page 5 of 9

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Q41.
How do government norms, rules, and regulations influence the exchange rate?

a.

They have no impact on the exchange rate

b.

Liberal policies increase demand for foreign currency

c.

Restrictive policies increase demand for the currency

d.

Both a and b

Discuss
Answer: (d).Both a and b Explanation:Government norms, rules, and regulations can impact the exchange rate. Liberal policies increase demand for foreign currency, while restrictive policies decrease demand for the currency.
Q42.
How does a change in income level affect the exchange rate of a country's currency?

a.

It has no effect on the exchange rate

b.

Higher income level leads to currency appreciation

c.

Higher income level leads to currency depreciation

d.

Higher income level leads to increased demand for the currency

Discuss
Answer: (d).Higher income level leads to increased demand for the currency Explanation:A higher income level, especially among corporate or multinational companies, increases demand for the currency and can lead to currency appreciation.
Q43.
What role does market speculation play in the determination of exchange rates?

a.

Positive speculation increases demand for the currency

b.

Positive speculation decreases demand for the currency

c.

Negative speculation increases demand for the currency

d.

Negative speculation decreases demand for the currency

Discuss
Answer: (a).Positive speculation increases demand for the currency Explanation:Positive speculation regarding the future exchange rate increases demand for the currency.
Q44.
What are the two basic levels of the Foreign Exchange Market based on transactions and access?

a.

Level 1 and Level 2

b.

Inter-bank level and Retail level

c.

Whole sale level and Retail level

d.

Commercial level and Investment level

Discuss
Answer: (b).Inter-bank level and Retail level Explanation:The first level of the market is occupied by the inter-bank market, while the other level consists of small banks, MNCs, hedge funds, and retailers.
Q45.
In which market segment are inter-bank dealings carried out?

a.

Whole sale segment

b.

Retail segment

c.

Commercial segment

d.

Investment segment

Discuss
Answer: (a).Whole sale segment Explanation:In the wholesale segment, inter-bank dealings are carried out.
Q46.
Which entity is considered the apex body or the banker's bank in the foreign exchange market?

a.

Commercial Bank

b.

Investment Banker

c.

Central Bank

d.

Non-Banking Financial Institution

Discuss
Answer: (c).Central Bank Explanation:The central bank is considered the apex body or the banker's bank in the foreign exchange market.
Q47.
What role does the Central Bank play in the foreign exchange market?

a.

Facilitates speculative trading

b.

Monitors financial market and intervenes to control money supply

c.

Participates in payment of goods and services

d.

Engages in aggressive investment

Discuss
Answer: (b).Monitors financial market and intervenes to control money supply Explanation:The Central Bank monitors the financial market, intervenes to control money supply, and checks inflation and interest rates.
Q48.
What is the role of MNCs in the foreign exchange market?

a.

Speculative transactions

b.

Source of aggressive investment

c.

Payment of goods and services

d.

All of the above

Discuss
Answer: (c).Payment of goods and services Explanation:MNCs participate in the foreign exchange market operation mainly for the payment of goods and services.
Q49.
What significant role do Hedge Funds play in the foreign exchange market?

a.

Speculative transactions and investment

b.

Payment of goods and services

c.

Facilitates inter-bank dealings

d.

Manages commercial turnover of currencies

Discuss
Answer: (a).Speculative transactions and investment Explanation:Hedge Funds are a major source of international finance, engaging in speculative transactions and investment in the foreign exchange market.
Q50.
What role do Investment Bankers play in the foreign exchange market?

a.

Act as intermediaries between individuals and foreign exchange market

b.

Facilitate speculative currency trading

c.

Make a two-way market for customers

d.

Manage retail foreign exchange trading

Discuss
Answer: (a).Act as intermediaries between individuals and foreign exchange market Explanation:Investment Bankers actively participate in foreign exchange operations, acting as intermediaries between individual investors or organizations and the foreign exchange market.
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