Who was the main architect behind the Bretton Woods system that established fixed exchange rates after World War II?
A) Milton Friedman
B) John Maynard Keynes
C) Harry Dexter White
D) Friedrich Hayek
Answer: C) Harry Dexter White
Which event led to the collapse of the Bretton Woods system in 1971?
A) The US stock market crash
B) The Nixon Shock
C) The introduction of the euro
D) The fall of the Berlin Wall
Answer: B) The Nixon Shock
What major change did the Bretton Woods Agreement enforce regarding currency exchanges?
A) Introduction of floating exchange rates
B) Fixed exchange rates based on the US dollar
C) Total abolition of currency exchange
D) Introduction of the gold standard
Answer: B) Fixed exchange rates based on the US dollar
Which of the following is a key function of the foreign exchange market?
A) To set the value of government bonds
B) To facilitate international trade and investments
C) To control interest rates globally
D) To set the prices for domestic stocks
Answer: B) To facilitate international trade and investments
The exchange rate between two currencies is determined by:
A) The government regulation alone
B) The supply and demand for those currencies
C) A fixed central price set by international organizations
D) The GDP of the countries involved
Answer: B) The supply and demand for those currencies
What does a "bid price" represent in the foreign exchange market?
A) The price at which a market maker will sell currency
B) The price at which a market maker will buy currency
C) The difference between the highest and lowest prices in a market
D) The amount of profit a currency pair generates
Answer: B) The price at which a market maker will buy currency
Which of the following is considered the primary market for foreign exchange transactions?
A) Over-the-counter market
B) Foreign Exchange Interbank market
C) Commodity Exchange market
D) Central bank's currency exchange
Answer: B) Foreign Exchange Interbank market
What is a characteristic of the 'spot market' in foreign exchange?
A) It involves long-term currency contracts
B) Currencies are traded immediately or within a very short time frame
C) It focuses on future exchange rates for currency pairs
D) It allows only large institutional investors to trade
Answer: B) Currencies are traded immediately or within a very short time frame
The 'forward market' in foreign exchange is characterized by:
A) The immediate exchange of currencies
B) Transactions that occur at a fixed price but are settled at a future date
C) Transactions that take place through currency exchange booths
D) The purchase of foreign exchange on a spot basis
Answer: B) Transactions that occur at a fixed price but are settled at a future date
Which of the following is true about the 'retail market' for foreign exchange?
A) It deals only with central banks
B) It involves large institutional transactions only
C) It allows individuals and businesses to exchange currencies for smaller amounts
D) It is restricted to cross-border business transactions
Answer: C) It allows individuals and businesses to exchange currencies for smaller amounts
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