Question 1

​Countries that have adopted the euro must agree on a single ____ policy.

Accepted Answer

A)  ​monetary 
B)  ​fiscal 
C)  ​worker compensation 
D)  ​foreign relations 
A)  ​monetary 
B)  ​fiscal 
C)  ​worker compensation 
D)  ​foreign relations

Question 2

Which of the following countries was probably the least affected (directly or indirectly) by the Asian crisis?

Accepted Answer

A)  Thailand 
B)  Indonesia 
C)  Russia 
D)  China 
E)  Malaysia 
A)  Thailand 
B)  Indonesia 
C)  Russia 
D)  China 
E)  Malaysia

Question 3

Which of the following is an example of direct intervention in foreign exchange markets?

Accepted Answer

A)  lowering interest rates 
B)  increasing the inflation rate 
C)  exchanging dollars for foreign currency 
D)  imposing barriers on international trade 
A)  lowering interest rates 
B)  increasing the inflation rate 
C)  exchanging dollars for foreign currency 
D)  imposing barriers on international trade

Question 4

Under a fixed exchange rate system, U.S. inflation would have a greater impact on inflation in other countries than it would under a freely floating exchange rate system.

Accepted Answer

A) True 
 B)False

Question 5

A central bank may attempt to stimulate a stagnant economy by weakening the value of the currency.

Accepted Answer

A) True 
 B)False

Question 6

During the period 1944-1971, the United States used a ____ system.

Accepted Answer

A)  euro exchange rate 
B)  fixed exchange rate 
C)  dirty float 
D)  flexible exchange rate 
A)  euro exchange rate 
B)  fixed exchange rate 
C)  dirty float 
D)  flexible exchange rate

Question 7

If the French government wants to decrease inflation in France, it will exchange foreign currency for euros.

Accepted Answer

A) True 
 B)False

Question 8

While a strong currency is a possible cure for high inflation, it may cause higher unemployment due to the attractive foreign prices that result from a strong home currency.

Accepted Answer

A) True 
 B)False

Question 9

​The interest rate of a country with a currency board:

Accepted Answer

A)  ​is less stable than it would be without a currency board. 
B)  ​is typically below the interest rate of the currency to which it is tied. 
C)  ​will move in tandem with the interest rate of the currency to which it is tied. 
D)  ​is completely independent of the interest rate of the currency to which it is tied. 
A)  ​is less stable than it would be without a currency board. 
B)  ​is typically below the interest rate of the currency to which it is tied. 
C)  ​will move in tandem with the interest rate of the currency to which it is tied. 
D)  ​is completely independent of the interest rate of the currency to which it is tied.

Question 10

​Assume Countries A, B, and C produce goods that are substitutes of each other and that these countries engage in trade with each other. Assume that Country A's currency floats against Country B's currency, and that Country C's currency is pegged to B's. If A's currency depreciates against B, then A's exports to C should ____, and A's imports from C should ____.

Accepted Answer

A)  ​decrease; increase 
B)  ​decrease; decrease 
C)  ​increase; decrease 
D)  ​increase; increase 
A)  ​decrease; increase 
B)  ​decrease; decrease 
C)  ​increase; decrease 
D)  ​increase; increase

Question 11

Which of the following is true about the Asian crisis?

Accepted Answer

A)  It was preceded by several years of large capital inflows to the affected countries. 
B)  It was preceded by a five-year recession in Asia. 
C)  Interest rates in the affected countries declined during the crisis. 
D)  Exchange rates of the affected countries were pegged to the Japanese yen to resolve the crisis. 
A)  It was preceded by several years of large capital inflows to the affected countries. 
B)  It was preceded by a five-year recession in Asia. 
C)  Interest rates in the affected countries declined during the crisis. 
D)  Exchange rates of the affected countries were pegged to the Japanese yen to resolve the crisis.

Question 12

​The risk-free interest rates among countries that have adopted the euro should:

Accepted Answer

A)  ​not necessarily be similar to risk-free rates in other countries. 
B)  ​equal the U.S. risk-free rate. 
C)  ​equal the risk-free rates in other European countries. 
D)  ​equal the risk-free rates in Asian countries. 
A)  ​not necessarily be similar to risk-free rates in other countries. 
B)  ​equal the U.S. risk-free rate. 
C)  ​equal the risk-free rates in other European countries. 
D)  ​equal the risk-free rates in Asian countries.

Question 13

​If the Fed desires to strengthen the dollar without affecting the dollar money supply, it should:

Accepted Answer

A)  ​exchange dollars for foreign currencies, and sell some of its existing Treasury security holdings for dollars. 
B)  ​exchange foreign currencies for dollars, and sell some of its existing Treasury security holdings for dollars. 
C)  ​exchange dollars for foreign currencies, and buy existing Treasury securities with dollars. 
D)  ​exchange foreign currencies for dollars, and buy existing Treasury securities with dollars. 
A)  ​exchange dollars for foreign currencies, and sell some of its existing Treasury security holdings for dollars. 
B)  ​exchange foreign currencies for dollars, and sell some of its existing Treasury security holdings for dollars. 
C)  ​exchange dollars for foreign currencies, and buy existing Treasury securities with dollars. 
D)  ​exchange foreign currencies for dollars, and buy existing Treasury securities with dollars.

Question 14

Common reasons mentioned in the text for central bank intervention in the foreign exchange market include all of the following except:

Accepted Answer

A)  to provide an alternative form of bank deposit insurance. 
B)  to establish implicit exchange rate boundaries. 
C)  to respond to temporary disturbances. 
D)  to smooth exchange rate movements. 
A)  to provide an alternative form of bank deposit insurance. 
B)  to establish implicit exchange rate boundaries. 
C)  to respond to temporary disturbances. 
D)  to smooth exchange rate movements.

Question 15

The Bretton Woods Agreement called for the establishment of a single European currency.

Accepted Answer

A) True 
 B)False

Question 16

China is commonly criticized for keeping the yuan's value at superficially high levels.

Accepted Answer

A) True 
 B)False

Question 17

Currency devaluation can boost a country's exports, but currency revaluation can increase foreign competition.

Accepted Answer

A) True 
 B)False

Question 18

In a sterilized exchange rate arrangement, a country's home currency value is pegged to a foreign currency or to some unit of account.

Accepted Answer

A) True 
 B)False

Question 19

The establishment of the euro allows for more consistent economic conditions across countries but eliminates the power of any individual European country to solve local economic problems with its own unique monetary policy.

Accepted Answer

A) True 
 B)False

Question 20

A primary result of the Bretton Woods Agreement was:

Accepted Answer

A)  the establishment of the European Monetary System (EMS). 
B)  establishing specific rules for when tariffs and quotas could be imposed by governments. 
C)  establishing that exchange rates of most major currencies were to be allowed to fluctuate 1 percent above or below their initially set values. 
D)  establishing that exchange rates of most major currencies were to be allowed to fluctuate freely without boundaries (although the central banks did have the right to intervene when necessary). 
A)  the establishment of the European Monetary System (EMS). 
B)  establishing specific rules for when tariffs and quotas could be imposed by governments. 
C)  establishing that exchange rates of most major currencies were to be allowed to fluctuate 1 percent above or below their initially set values. 
D)  establishing that exchange rates of most major currencies were to be allowed to fluctuate freely without boundaries (although the central banks did have the right to intervene when necessary).

Countries that have adopted the euro must agree on a single ____ policy.

Which of the following countries was probably the least affected (directly or indirectly) by the Asian crisis?

Which of the following is an example of direct intervention in foreign exchange markets?

Under a fixed exchange rate system, U.S. inflation would have a greater impact on inflation in other countries than it would under a freely floating exchange rate system.

A central bank may attempt to stimulate a stagnant economy by weakening the value of the currency.

During the period 1944-1971, the United States used a ____ system.

If the French government wants to decrease inflation in France, it will exchange foreign currency for euros.

While a strong currency is a possible cure for high inflation, it may cause higher unemployment due to the attractive foreign prices that result from a strong home currency.

The interest rate of a country with a currency board:

Which of the following is true about the Asian crisis?

The risk-free interest rates among countries that have adopted the euro should:

If the Fed desires to strengthen the dollar without affecting the dollar money supply, it should:

Common reasons mentioned in the text for central bank intervention in the foreign exchange market include all of the following except:

The Bretton Woods Agreement called for the establishment of a single European currency.

China is commonly criticized for keeping the yuan's value at superficially high levels.

Currency devaluation can boost a country's exports, but currency revaluation can increase foreign competition.

In a sterilized exchange rate arrangement, a country's home currency value is pegged to a foreign currency or to some unit of account.

The establishment of the euro allows for more consistent economic conditions across countries but eliminates the power of any individual European country to solve local economic problems with its own unique monetary policy.

A primary result of the Bretton Woods Agreement was:

Multinational Financial Management: an Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

International Arbitrage and Interest Rate Parity

Relationships Among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Capital Structure and Cost of Capital

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 6: Government Influence on Exchange Rates

​Countries that have adopted the euro must agree on a single ____ policy.

Which of the following countries was probably the least affected (directly or indirectly) by the Asian crisis?

Which of the following is an example of direct intervention in foreign exchange markets?

Under a fixed exchange rate system, U.S. inflation would have a greater impact on inflation in other countries than it would under a freely floating exchange rate system.

A central bank may attempt to stimulate a stagnant economy by weakening the value of the currency.

During the period 1944-1971, the United States used a ____ system.

If the French government wants to decrease inflation in France, it will exchange foreign currency for euros.

While a strong currency is a possible cure for high inflation, it may cause higher unemployment due to the attractive foreign prices that result from a strong home currency.

​The interest rate of a country with a currency board:

Which of the following is true about the Asian crisis?

​The risk-free interest rates among countries that have adopted the euro should:

​If the Fed desires to strengthen the dollar without affecting the dollar money supply, it should:

Common reasons mentioned in the text for central bank intervention in the foreign exchange market include all of the following except:

The Bretton Woods Agreement called for the establishment of a single European currency.

China is commonly criticized for keeping the yuan's value at superficially high levels.

Currency devaluation can boost a country's exports, but currency revaluation can increase foreign competition.

In a sterilized exchange rate arrangement, a country's home currency value is pegged to a foreign currency or to some unit of account.

The establishment of the euro allows for more consistent economic conditions across countries but eliminates the power of any individual European country to solve local economic problems with its own unique monetary policy.

A primary result of the Bretton Woods Agreement was:

Multinational Financial Management: an Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

International Arbitrage and Interest Rate Parity

Relationships Among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Capital Structure and Cost of Capital

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Countries that have adopted the euro must agree on a single ____ policy.

The interest rate of a country with a currency board:

The risk-free interest rates among countries that have adopted the euro should:

If the Fed desires to strengthen the dollar without affecting the dollar money supply, it should: