Discussion. 1. Name a payment mechanism used in earlier times

1. Name a payment mechanism used in earlier times. What was it later re­
placed by?

2. Briefly describe the importance of the gold standard.

3. Under the gold standard, currencies were convertible into gold. This con­
vertibility was abolished for most currencies. Which currency remained convertible
into gold until 1971?

4. What is the system of fixed exchange rates?

5. What does devaluation mean? Name the countries in the Western industri­
alized world that devalued their currencies?

6. Are the intervention points applicable in a system of floating exchange
rates? Explain your answer.

7. What is the function of a foreign exchange broker?

8. Name at least five active participants in the foreign exchange market.

9. Briefly describe spot and forward transactions. Give an example of each.

10. When does deliveiy of the foreign exchange take place in a spot transaction
and why?

11. When does payment and delivery of foreign exchange take place in a for­
ward transaction? At what point is the exchange rate determined?

12. An open position is either long or short. Describe both types.

13. What is the difference between a bid and an offer?

14. What is arbitrage? Give an example of interest arbitrage.

15. Review how foreign exchange trading developed through the years, how
international agreements today have shaped it, and what its main functions are.

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