Judge the assertion and the reason

Exercise and reference answers

Questions

1. Reason

   It lost more than a quarter of its value in foreign currency markets.

   Verdict

   Both are true; the reason explains the assertion.

   Assertion

   The dollar depreciated between 2002 and 2008.

2. Reason

   A central bank can implement soft peg and hard peg policies.

   Verdict

   Both are true; the reason does not explain the assertion.

   Assertion

   Exchange rates can change very swiftly.

3. Reason

   A floating rate means the central bank fixes the rate at all times.

   Verdict

   The assertion is true and the reason is false.

   Assertion

   A floating rate is set by the foreign exchange market.

4. Reason

   Arbitrage means buying and selling across borders at a profit.

   Verdict

   The assertion is false and the reason is true.

   Assertion

   Arbitrage works even when prices are identical everywhere.

Instructions

Read both statements, then pick the verdict that fits.

Explanation