Supply and Demand in Forex general knowledge quiz

Test your understanding of how supply and demand affect currency prices in the Forex market. This quiz covers the basics of economic factors, central bank policies, and market reactions that influence currency value. Whether you’re a beginner or looking to refresh your knowledge, dive in to see how well you grasp the forces that move the Forex world.

1 / 10

How does a strong economic performance in a country affect the supply and demand for its currency in the forex market?

Decreases demand, as people seek safer investments

Both A and C are correct

Increases demand, as confidence in the economy attracts investors

Increases supply, as people are more willing to invest in the country

2 / 10

What effect does a trade deficit have on a country’s currency in terms of supply and demand?

It increases demand for the currency, increasing its value

It increases the supply of the currency on the global market, potentially decreasing its value

It has no effect on the currency’s value

It decreases the supply, increasing the currency’s value

3 / 10

How can geopolitical events impact the supply and demand for a currency?

By causing uncertainty, often leading to an increase in demand

They have no impact on supply and demand

By causing uncertainty, often leading to a decrease in demand

By increasing the currency’s stability and attractiveness

4 / 10

What does the concept of supply and demand in forex trading primarily determine?

The interest rates of central banks

The volume of trades for a currency pair

The time of day the forex market is most active

The price movement of currency pairs

5 / 10

In forex trading, what typically happens to a currency’s value when there is more demand than supply?

The value increases

The value decreases

The currency is considered overbought

The value remains the same

6 / 10

What is the effect of a “buy” order in the forex market on the supply and demand curve of the purchased currency?

It shifts the demand curve to the righ

It shifts the supply curve to the left

It has no effect on the curves

It shifts the supply curve to the right

7 / 10

How does inflation impact the demand for a country’s currency in the forex market?

High inflation decreases demand as it erodes the currency’s purchasing power

Inflation has no direct impact on demand

High inflation increases demand as it signals a growing economy

Inflation increases the supply of money, which is neutral for demand

8 / 10

What role does a central bank play in affecting the supply and demand of its national currency?

It has no significant effect

It affects both supply and demand through monetary policy, including interest rate decisions

It only affects the demand side through interest rate adjustments

It only influences foreign investors’ interest

9 / 10

In the context of forex, what does an “oversupplied” currency mean for its future price direction?

The currency will be removed from trading

The price is likely to increase

The price will remain stable

The price is likely to decrease

10 / 10

A significant increase in a country’s interest rates would likely:

Increase supply and decrease demand simultaneously

Increase demand for that country’s currency

Decrease demand for that country’s currency

Have no effect on supply or demand

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