Speculators Play an Important Role in a System of Floating

question 52

Multiple Choice

Speculators play an important role in a system of floating exchange rates because

• A)to make a profit, they must buy a currency when its value is low and sell it when its value is high.
• B)their purchases and sales lead to wild gyrations in exchange rates and thus increase instability.
• C)they place additional risks on businesses that need to purchase and sell foreign currency.
• D)All of the above are correct.

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Definitions:

Net Operating Income

A financial metric that calculates a company’s income after operating expenses are subtracted but before interest and taxes are deducted.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels of the business, allowing for more accurate financial planning.

Total Expenses

The sum of all costs and expenditures that a company incurs in a specific period, including operating and non-operating expenses.

Planning Budget

An estimate of the income and expenses that a company anticipates over a period, factoring in various operational objectives.