True or false

1.A bank quotes the following rates for euro and peso: Peso20.15-40/. Then the

bid price of peso is 20.15.

2. Under the classical gold standard, a country running trade deficit will likely have a trade surplus in the future according to the price-specie flow mechanism.

3. Like gold standard, the currency board (foreign exchange rate policy) is doomed to fail.

4. You are to buy 200m with Australian dollars through a forward contract maturing in 6 months. The forward price is F6(/A$)=100. If the spot rate at the maturity is S6(/A$)=80. You have a loss in the forward trading.

5. For euro to become a world currency, it is necessary that the eurozone countries run long-term trade deficits.

6. For a country with deficit in current account, devaluation of domestic currency will help reduce the deficit immediately.

7. In a nation which pegs its currency to the U.S. dollar at fixed exchange rates, it is very likely that the central bank must purchase dollars with its domestic currency when facing large trade surplus.