Quiz 7 The rate at which one currency is traded for another is called ______________. optimum rate currency rate exchange rate Currencies like MRF and US$ cannot be bought and sold because they are not like other commodities. True False If a country has a floating exchange rate system, the value of the currency is determined freely by the forces of demand and supply with no _______________ intervention. government private sector foreign individual When the value of the local currency goes down in a ___________ exchange rate system, it is known as a depreciation. fixed floating A sustained balance of trade deficit over the years will lead to depreciation of the local currency. True False In a ____________ exchange rate system, a country pegs the local currency to a foreign currency or a basket of currencies. fixed floating What is an exchange equalization account? An account held by commercial banks to buy and sell foreign currency. An account held at the central bank by commercial banks to buy US Dollars. An account held by the Central Bank to buy and sell foreign currencies in order to compensate for the excess demand and supply. Speculators try to gain profit from predicting what might happen to the value of the money in the future. True False An increase in the value of the local currency in a floating exchange rate system is known as an _____________. depreciation appreciation revaluation devaluation In a pegged system, when the central bank raises the value of the currency, it is known as a _____________. revaluation depreciation devaluation appreciation Loading … Question 1 of 10