Question : A decrease in the real exchange rate implies:

Option 1: Increased competitiveness of domestic goods in the international market.
 

Option 2: Reduced competitiveness of domestic goods in the international market.
 

Option 3: Increased inflation in the domestic economy.

Option 4: Reduced inflation in the domestic economy.

Question : In a floating exchange rate system, the exchange rate is determined by market forces, and fluctuations in the rate are caused by changes in ________.

Option 1: government policies
 

Option 2: inflation rates
 

Option 3: interest rates

Option 4: supply and demand

Question : What is the term used to describe the rate at which a central bank buys or sells its own currency in the foreign exchange market?

Option 1: Spot exchange rate
 

Option 2: Nominal exchange rate
   

Option 3: Intervention exchange rate

Option 4: Forward exchange rate

Question : An increase in the nominal exchange rate indicates:

Option 1: Appreciation of the domestic currency.

Option 2: Depreciation of the domestic currency.
 

Option 3: No change in the value of the domestic currency.

Option 4: Inflation in the domestic economy.

Question : What is the term used to describe the difference between the nominal exchange rate and the inflation rate between two countries?

Option 1: Real exchange rate
  

Option 2: Cross exchange rate
    

Option 3: Forward exchange rate

Option 4: Spot exchange rate