Question : Which of the following is an example of a direct exchange rate quotation?
Option 1: USD/EUR = 1.25
Option 2: EUR/USD = 0.80
Option 3: GBP/USD = 1.40
Option 4: AUD/JPY = 82.50
Correct Answer: USD/EUR = 1.25
Solution : The correct answer is a) USD/EUR = 1.25
An example of a direct exchange rate quotation is when the domestic currency is expressed as the base currency and the foreign currency is expressed as the quote currency. In this case, the USD/EUR = 1.25 indicates that 1 United States Dollar (USD) can be exchanged for 1.25 Euros (EUR).
In contrast, an indirect exchange rate quotation is when the foreign currency is expressed as the base currency and the domestic currency is expressed as the quote currency. Examples b), c), and d) are all indirect exchange rate quotations:
b) EUR/USD = 0.80 indicates that 1 Euro (EUR) can be exchanged for 0.80 United States Dollars (USD).
c) GBP/USD = 1.40 indicates that 1 British Pound (GBP) can be exchanged for 1.40 United States Dollars (USD).
d) AUD/JPY = 82.50 indicates that 1 Australian Dollar (AUD) can be exchanged for 82.50 Japanese Yen (JPY).
Question : Which of the following is an example of an indirect exchange rate quotation?
Option 1: USD/INR = 75.50
Option 2: EUR/USD = 1.20
Option 3: GBP/AUD = 1.80
Option 4: JPY/GBP = 0.0075
Option 1: USD/JPY = 110.50
Option 2: EUR/GBP = 0.85
Option 3: GBP/CHF = 1.25
Option 4: AUD/CAD = 0.95
Question : Which of the following is an example of a direct quote for an exchange rate?
Option 1: USD/EUR = 0.85
Option 2: GBP/CAD = 1.65
Option 3: AUD/NZD = 1.10
Option 4: JPY/INR = 0.60
Question : Which of the following is an example of a freely floating exchange rate system?
Option 1: Gold standard
Option 2: Currency board arrangement
Option 3: Managed float exchange rate
Option 4: Pegged exchange rate
Question : Which of the following exchange rate systems provides the highest level of exchange rate stability?
Option 1: Floating exchange rate
Option 2: Fixed exchange rate ‘
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