ECN 306 HW7.docVIP

1. Which of the following is (are) true regarding the foreign exchange market? a. There are approximately $5 trillion dollars of transactions monthly. b. There are twenty large banks that account for about 50% of foreign exchange transactions. c. The minimum size of transaction for an exchange in the interbank market is $5 million dollars. d. The interbank market consists largely of the exchange of savings deposits. e. All of the above are correct. Answer: _____ 2. The greater part of the money assets traded in foreign exchange markets are _______ in _______. a. time deposits; banks b. demand deposits; banks c. bonds; brokerage houses d. stocks; brokerage houses Answer: _____ 3. A unique aspect of the foreign exchange market is that you can make contracts today for the future delivery or sale of currency at a fixed price. a. True b. False Answer: _____ 4. The majority of foreign exchange trading is among: a. Citizens (who need foreign exchange for travel abroad) b. Retailers c. Banks d. Governments e. None of the above. Answer: _____ 5. Suppose that Haiti received $300 million in clothing, tents and medicines from country X following the devastating 2010 earthquake. Which below correctly shows how this transaction would have been reflected Haitis balance of payments account? a. Xg = +$300 million; FA = -$300 million. b. Mg = -$300 million; FA = +$300 million. c. Mg = -$300 million; NUT = +$300 million. d. Xg = +$300 million; NUT = -$300 million. e. Mg= +$300 million; Statistical discrepancy = -$300 million. Answer: _____ 6. According to Dr. Mendez, which sub-account of the balance of payments often garners most attention by the media? (Hint: the account is published monthly due to the ease of collecting data.) a. Net factor income earned abroad or (IR-IP). b. The net unilateral transfers account. c. The statistical discrepancy. d. The merchandise trade balance. e. All of the above. Answer: _____ 7. Use the