The Actions of the Arbitrageurs in the Foreign Exchange Markets

question 141

Multiple Choice

The actions of the arbitrageurs in the foreign exchange markets:

• A)destabilize foreign exchange markets.
• B)are highly risky.
• C)have no effect on exchange rates.
• D)help ensure that exchange rates are equalized across all markets.
• E)are the same as those undertaken by speculators.

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Definitions:

Industry Experience

Refers to the practical knowledge and insight gained through direct involvement and work within a specific industry.

Normal Returns

The minimum profit necessary for a company to remain competitive in the market, essentially covering opportunity costs.

Perfectly Elastic

Describes a situation in demand or supply where the quantity demanded or supplied changes infinitely in response to any change in price.

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, and free entry and exit, which leads to price being equal to marginal cost.