AP®︎ Macroeconomics: Topic 6.3 Practice Test
Prepare for your quiz, test, or the AP exam with focused practice questions on Topic 6.3 of AP Macroeconomics – The Foreign Exchange Market.
Questions List
Topic 6.3
Question 1 Easy
This question tests the following: MKT-5.B
What is the foreign exchange market primarily concerned with?
What You’re Being Tested On:
Explore the learning objectives taken directly from the College Board’s AP® Macroeconomics Curriculum. Ensure you’re prepared for the exact topics covered on the AP® exam, in-class tests, and quizzes, and gain confidence in your mastery of the material.
Topic 6.3: The Foreign Exchange Market
Learning Objective: MKT-5.B
a. Define the foreign exchange market, demand for currency, and supply of currency. b. Explain (using graphs as appropriate) the relationship between the exchange rate and the quantity of currency demanded (supplied).
Essential Knowledge: MKT-5.B.1
The demand for a currency in a foreign exchange market arises from the demand for the country’s goods, services, and financial assets and shows the inverse relationship between the exchange rate and the quantity demanded of a currency.
Essential Knowledge: MKT-5.B.2
The supply of a currency in a foreign exchange market arises from making payments in other currencies and shows the positive relationship between the exchange rate and the quantity supplied of a currency.
Learning Objective: MKT-5.C
Define (using graphs as appropriate) the equilibrium exchange rate.
Essential Knowledge: MKT-5.C.1
In the foreign exchange market, equilibrium is achieved when the exchange rate is such that the quantities demanded and supplied of the currency are equal.
Learning Objective: MKT-5.D
Explain (using graphs as appropriate) how exchange rates adjust to restore equilibrium in the foreign exchange market.
Essential Knowledge: MKT-5.D.1
Disequilibrium exchange rates create surpluses and shortages in the foreign exchange market. Market forces drive exchange rates toward equilibrium.
