Exam 9: The International Monetary and Financial Environment

Which of the following statements is most likely to be TRUE regarding a currency's price if the supply of the currency increases?

Plas-Tex Exporting (Scenario) Plas-Tex Plastic Company manufactures plastic storage containers of all different sizes. Plas-Tex has been exporting more storage containers to Europe recently because of the depreciation of the U.S. dollar relative to the euro. Plas-Tex CEO, Wayne Chisholm, has prepared a report for the annual shareholders meeting in which he outlines his manufacturing and sales recommendations for the upcoming year. -Which of the following should be considered closely before Chisholm recommends increasing production to take advantage of the current exchange rate?

High Inflation (Scenario) Country X primarily exports coffee beans, and in the last two years the demand for coffee beans has caused economic growth in Country X. To accommodate the economic growth, the central bank of Country X increased the nation's money supply. Country X is now experiencing inflation of over 200 percent. A group of economic experts, government representatives, and business owners have gathered for a conference in Country X to discuss the situation. -Which of the following should be considered before the government takes any action to correct the high rate of inflation?

The Bretton Woods Agreement established International Monetary Fund (IMF; www.imf.org) as an international agency that attempted to stabilize currencies by monitoring the foreign exchange systems of member countries and lending money to developing economies.

The largest proportion of government debt results from national pension and healthcare programs.

Which of the following statements is TRUE about currencies?

The official price of gold is used to determine the value of all major currencies in the exchange rate system used for international trade today.

Explain the differences between the international monetary system and the International Monetary Fund. What are the three major types of crises most frequently addressed by the International Monetary Fund?

The foreign-exchange market is located exclusively in the United States.

Global Finance Meeting (Scenario) International finance experts are meeting in Tokyo for a weeklong conference to discuss the current state of global finance. At the conference are representatives from a variety of monetary and financial organizations. Expert A often works with international firms arranging capital in the form of shares. Expert B works for the Bank of Nova Scotia in the British Virgin Islands (as offshore bank). Expert C advises international firms on corporate mergers. -Expert A most likely works for which of the following?

Which of the following is a characteristic of momentum trading?

Which of the following, originally known as the International Bank for Reconstruction and Development, was founded to fund construction of Japan and Europe after World War II?

Global Finance Meeting (Scenario) International finance experts are meeting in Tokyo for a weeklong conference to discuss the current state of global finance. At the conference are representatives from a variety of monetary and financial organizations. Expert A often works with international firms arranging capital in the form of shares. Expert B works for the Bank of Nova Scotia in the British Virgin Islands (as offshore bank). Expert C advises international firms on corporate mergers. -Expert C most likely works for which of the following?

The Bank for International Settlements is an international organization that fosters cooperation among central banks and other governmental agencies.

In a short essay, describe the underlying reasons for inflation. Provide an example of a nation that faced a high rate of inflation.

________ are managers of pensions and mutual funds, as well as insurance companies who have assumed an enormous role in driving capital markets around the world.

Which of the following does the central bank perform in order to accommodate a nation's economic growth?

Which of the following best characterizes the functions of the World Bank?

Explain why international financial and monetary activities are becoming more integrated. What are the risks and benefits of the growing integration of the two activities?

The Bretton Woods Agreement most likely influenced the current trend towards international free trade when member countries agreed to ________.