The Current Exchange Rate Is €1

question 42

Multiple Choice

The current exchange rate is €1.00 = $1.50.Compute the correct balances in Bank A's correspondent account(s) with bank B if a currency trader employed at Bank A buys €100,000 from a currency trader at bank B for $150,000 using its correspondent relationship with Bank B)

• A)Bank A's dollar-denominated account at B will fall by $150,000.
• B)Bank B's dollar-denominated account at A will fall by $150,000.
• C)Bank A's pound-denominated account at B will fall by €100,000.
• D)Bank B's pound-denominated account at A will rise by €100,000.

---

Definitions:

Quantity of Output

The total amount of a particular good or service that is produced by a firm or economy.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, and firms in the market are making zero economic profit, indicating no incentive for entry or exit from the market.

Price Levels

An aggregate average of current prices for goods and services in the economic sector.

Output Levels

The total amount of goods or services produced by a company or country within a specific period.