The Term Basis Point Used for the Margin Added to the Indicator

question 33

Multiple Choice

The term basis point used for the margin added to the indicator rate is:

• A) 0.01
• B) 0.001
• C) 0.0001
• D) 0 1%

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Definitions:

Flexible Exchange Rates

A currency system where the value of a currency is allowed to fluctuate according to the foreign exchange market.

Trade Deficit

The amount by which a nation’s imports of goods (or goods and services) exceed its exports of goods (or goods and services).

Purchasing-Power-Parity Theory

The idea that if countries have flexible exchange rates (rather than fixed exchange rates), the exchange rates between national currencies will adjust to equate the purchasing power of various currencies. In particular, the exchange rate between any two national currencies will adjust to reflect the price-level differences between the two countries.

Inflation Rates

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.