BUSI 3250 LATEST 2026 STUDY GUIDE QUESTIONS AND
ANSWERS GUARANTEE A+
✔✔fixed exchange rates - ✔✔currency's value is tied to the value of another currency or
gold
✔✔par value - ✔✔stated value
✔✔reserves - ✔✔Assets held by a nation's central bank, used to back up government
liabilities
✔✔Triffin Paradox - ✔✔national currency that is also a reserve currency will eventually
run a deficit, leading to a lack of confidence in the reserve currency and a financial crisis
✔✔Special Drawing Rights (SDR) - ✔✔the unit of account for the IMF and other
international organizations
✔✔The Central Reserve/National Currency Conflict - ✔✔• U.S. dollar most used central
reserve since end of WWII.
• Holding large amounts of U.S. dollars eventually means they will lose value (Triffin
paradox).
• IMF would like a non-national asset to become main reserve.
✔✔floating exchange rates - ✔✔Determined by supply and demand that allow currency
values to float against one another
✔✔Jamaica Agreement - ✔✔established flexible exchange rates among IMF members
✔✔Current Currency Arrangements - ✔✔1.Exchange arrangement with no separate
legal tender
2. Currency board agreement
3. conventional fixed-peg arrangement
4. Stabilized arrangement
5. crawling peg
6. crawling band
7. managed floating
8. free floating exchange rates
✔✔crawling peg - ✔✔an exchange rate that follows a path determined by a decision of
the government or the central bank and is achieved in a similar way to a fixed exchange
rate
✔✔crawling band - ✔✔readjusts the country's currency to maintain fluctuation margins
around a central rate
, ✔✔managed floating - ✔✔The currency fluctuates, while the country's monetary
authority actively intervenes on the exchange market without specifying or making
public its goals and targets
✔✔Free Floating Exchange Rate - ✔✔Determined by supply and demand of that
foreign money
✔✔Bank for International Settlements - ✔✔Institution for central bankers; operates to
build cooperation in order to foster monetary and financial stability; known as most
discrete financial institution in the world
✔✔floating currency values - ✔✔the major currencies are allowed by their central banks
to fluctuate freely against each other
✔✔reciprocal currency - ✔✔quoted as dollars per unit of currency instead of in units of
currency per dollar
✔✔spot rate - ✔✔the exchange rates between two currencies for delivery within two
business days
✔✔forward currency market - ✔✔Trading market for currency contracts deliverable 30,
60, 90, or 180 days in the future
✔✔forward rate - ✔✔The exchange rate between two currencies for delivery in the
future, usually 30, 60, 90, or 180 days
✔✔bid price - ✔✔Highest-priced buy order currently in the market
✔✔ask price - ✔✔Lowest-priced sell order currently in the market
✔✔Causes of exchange rate movement - ✔✔-Monetary policies
-Fiscal policies
-Law of one price concept
-Arbitrage
-Fisher effect
-international fisher effect
-Purchasing power parity
✔✔international fisher effect - ✔✔says the interest rate differentials for any two
currencies will reflect the expected change in their exchange rates
✔✔Exchange Rate Forecasting - ✔✔important because exchange rates influence all
aspects of business.
ANSWERS GUARANTEE A+
✔✔fixed exchange rates - ✔✔currency's value is tied to the value of another currency or
gold
✔✔par value - ✔✔stated value
✔✔reserves - ✔✔Assets held by a nation's central bank, used to back up government
liabilities
✔✔Triffin Paradox - ✔✔national currency that is also a reserve currency will eventually
run a deficit, leading to a lack of confidence in the reserve currency and a financial crisis
✔✔Special Drawing Rights (SDR) - ✔✔the unit of account for the IMF and other
international organizations
✔✔The Central Reserve/National Currency Conflict - ✔✔• U.S. dollar most used central
reserve since end of WWII.
• Holding large amounts of U.S. dollars eventually means they will lose value (Triffin
paradox).
• IMF would like a non-national asset to become main reserve.
✔✔floating exchange rates - ✔✔Determined by supply and demand that allow currency
values to float against one another
✔✔Jamaica Agreement - ✔✔established flexible exchange rates among IMF members
✔✔Current Currency Arrangements - ✔✔1.Exchange arrangement with no separate
legal tender
2. Currency board agreement
3. conventional fixed-peg arrangement
4. Stabilized arrangement
5. crawling peg
6. crawling band
7. managed floating
8. free floating exchange rates
✔✔crawling peg - ✔✔an exchange rate that follows a path determined by a decision of
the government or the central bank and is achieved in a similar way to a fixed exchange
rate
✔✔crawling band - ✔✔readjusts the country's currency to maintain fluctuation margins
around a central rate
, ✔✔managed floating - ✔✔The currency fluctuates, while the country's monetary
authority actively intervenes on the exchange market without specifying or making
public its goals and targets
✔✔Free Floating Exchange Rate - ✔✔Determined by supply and demand of that
foreign money
✔✔Bank for International Settlements - ✔✔Institution for central bankers; operates to
build cooperation in order to foster monetary and financial stability; known as most
discrete financial institution in the world
✔✔floating currency values - ✔✔the major currencies are allowed by their central banks
to fluctuate freely against each other
✔✔reciprocal currency - ✔✔quoted as dollars per unit of currency instead of in units of
currency per dollar
✔✔spot rate - ✔✔the exchange rates between two currencies for delivery within two
business days
✔✔forward currency market - ✔✔Trading market for currency contracts deliverable 30,
60, 90, or 180 days in the future
✔✔forward rate - ✔✔The exchange rate between two currencies for delivery in the
future, usually 30, 60, 90, or 180 days
✔✔bid price - ✔✔Highest-priced buy order currently in the market
✔✔ask price - ✔✔Lowest-priced sell order currently in the market
✔✔Causes of exchange rate movement - ✔✔-Monetary policies
-Fiscal policies
-Law of one price concept
-Arbitrage
-Fisher effect
-international fisher effect
-Purchasing power parity
✔✔international fisher effect - ✔✔says the interest rate differentials for any two
currencies will reflect the expected change in their exchange rates
✔✔Exchange Rate Forecasting - ✔✔important because exchange rates influence all
aspects of business.
