ECS3703 Assignment 1 (DETAILED ANSWERS) Semester 2 2025 - DISTINCTION GUARANTEED

ECS3703 Assignment 1 (DETAILED ANSWERS) Semester 2 2025 - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED Answers, guidelines, workings and references ,. The foreign exchange market is stable when a. All of the above b. The supply curve of foreign exchange is negatively inclined and less elastic than the demand curve c. The demand curve of foreign exchange is negatively inclined, and the supply curve of foreign exchange ispositively inclined d. The sum of the absolute values of the elasticity of the nation's demand of imports and the foreign demand for the nation's exports is greater than one Clear my choice An effective exchange rate is a a. Spot rate b. Flexible exchange rates c. Forward rate d. weighted average of the exchange rates between the domestic currency and the nation's most important trade partners Clear my choice Question 3 Not yet answered Marked out of 2.00 Question 4 Not yet answered Marked out of 2.00 Question 5 Not yet answered Marked out of 2.00 If the BP curve is above the point of intersection of the IS and LM curves, the nation will: a. have a balance of payments deficit at that level of income b. have a balance of payments surplus at that level of income c. be in recession d. face inflation Clear my choice To correct a balance of payments deficit and unemployment a nation requires a: a. devaluation and contractionary fiscal and monetary policies b. revaluation and either expansionary or contractionary fiscal and monetary policies c. devaluation and either expansionary or contractionary fiscal and monetary policies d. devaluation and expansionary fiscal and monetary policies Clear my choice Which is not a function of the foreign exchange market? a. to provide the facilities for hedging b. to diversify risks c. to transfer funds from one nation to another d. to finance trade Clear my choice Question 6 Not yet answered Marked out of 2.00 Question 7 Not yet answered Marked out of 2.00 Question 8 Not yet answered Marked out of 2.00 The relative PPP theory gives better results a. in tests including developed and developing countries b. when structural changes take place c. the greater is the level of commodity aggregation d. in the long run than in the short run Clear my choice Which is not a debit transaction? a. Primary income receivable b. Export of goods and services c. None of the above d. Secondary income receivable Clear my choice The monetary approach to the balance of payments a. postulates that money plays the crucial role in the long run both as a disturbance and adjustment in the nation's balance of payments b. views the balance of payments as an essentially monetary phenomenon c. rests on the purchasing power-parity theory d. all of the above Clear my choice Question 9 Not yet answered Marked out of 2.00 Question 10 Not yet answered Marked out of 2.00 Question 11 Not yet answered Marked out of 2.00 Statistical discrepancy is needed to ensure that a. Current account plus capital account equals financial account b. Current account equal capital account plus financial account c. Current account plus the financial account equal capital account d. Current account minus capital account equal financial account Clear my choice The two parts of each transaction cannot be recorded in the current or financial account. a. False b. Can be true or false c. Depends on whether it is a current account or a financial account transaction d. True Clear my choice A depreciation of a nation's currency is a. deflationary for the nation b. any of the above c. deflationary for the trade partner d. inflationary for the nation Clear my choice Question 12 Not yet answered Marked out of 2.00 Question 13 Not yet answered Marked out of 2.00 Question 14 Not yet answered Marked out of 2.00 A depreciation of the nation's currency causes its terms of trade to a. any of the above b. deteriorate c. remain unchanged d. Improve Clear my choice A change from R1=€1 to R2=€1 represents a. an appreciation of the rand b. None of the above c. depreciation of the rand d. a depreciation of the rand Clear my choice Hedging refers to a. Foreign exchange speculation b. Foreign exchange arbitrage c. The acceptance of a foreign exchange risk d. The avoidance of a foreign exchange risk Clear my choice Question 15 Not yet answered Marked out of 2.00 Direct controls refer to: a. tariffs, quotas, and other quantitative restrictions on the flow of international trade b. all of the above c. multiple exchange rates d. restrictions on international capital flows