The Current Exchange Rate Is £1

question 1

Multiple Choice

The current exchange rate is £1.00 = $2.00.Compute the correct balances in Bank A's correspondent account(s) with bank B if a currency trader employed at Bank A buys £45,000 from a currency trader at bank B for $90,000 using its correspondent relationship with Bank B.

• A)Bank A's dollar-denominated account at B will rise by $90,000.
• B)Bank B's dollar-denominated account at A will fall by $90,000.
• C)Bank A's pound-denominated account at B will rise by £45,000.
• D)Bank B's pound-denominated account at A will rise by £45,000.

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Definitions:

Wage-Price Spiral

A macroeconomic concept describing a situation where rising wages lead to increased prices, which in turn lead to demands for higher wages, thus perpetuating inflation.

Consumer Price Index

A calculation that evaluates the weighted mean prices of a group of consumer items and services, including healthcare, food, and transport, for assessing inflation.

Percent Per Year

A rate or proportion of a quantity expressed as a fraction of 100 per annum.

Inflation

The speed at which the average price of goods and services increases, resulting in a reduction of money's buying power.