ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A decrease in the purchasing power of the currency
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The use of credit and debit cards as mediums of exchange
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An increase in the prices of federal bonds
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Appreciation of the currency in the international money market
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An increase in the supply of foreign currencies in the international money market
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Detailed explanation-1: -The correct answer is: a. the decrease in the purchasing power of the currency Explanation: The store of value function refers to an asset’s ability to …
Detailed explanation-2: -Which of the following most undermines the ability of a nation’s currency store value? A decrease in the purchasing power of the currency.
Detailed explanation-3: -When the Fed buys securities on the open market, cash is transferred to these banks, increasing the nation’s money supply. Conversely, when the Fed sells government securities, these banks have less cash available to them – a decrease in the nation’s money supply.
Detailed explanation-4: -An exchange rate is a relative price of one currency expressed in terms of another currency (or group of currencies). For economies like Australia that actively engage in international trade, the exchange rate is an important economic variable.
Detailed explanation-5: -Deflation is associated with an increase in interest rates, which will cause an increase in the real value of debt. As a result, consumers are likely to defer their spending.