Question 1

In this system, a currency's value depends partly upon active government intervention in the foreign exchange market.

Accepted Answer

A) ​independent floating exchange rate system 
B) ​WTO exchange rate system 
C) ​fixed exchange rate system 
D) ​managed floating exchange rate system 
E) ​government exchange rate system 
A) ​independent floating exchange rate system 
B) ​WTO exchange rate system 
C) ​fixed exchange rate system 
D) ​managed floating exchange rate system 
E) ​government exchange rate system

Question 2

According to the Big Mac Index, the dollar interest rate on U.S. and European bonds should be the same. Otherwise, there would be no arbitrage opportunities for investors.

Accepted Answer

A) True 
 B)False

Question 3

According to the law of one price, identical goods should sell for the same price in different countries according to the local currencies.

Accepted Answer

A) True 
 B)False

Question 4

Differentiate between hard and soft currencies. Provide an example of each.

Accepted Answer

Hard currencies are those that are widel

Question 5

Of the following, which is NOT a key principle of the Jamaica Agreement?

Accepted Answer

A) Members could adopt their own exchange systems. 
B) A system of global fixed exchange rates would only be implemented if approved by a vote of 85 percent of membership. 
C) Gold would no longer be a common denominator of the monetary system. 
D) The SDR created by the IMF was recommended as the primary reserve asset of the international monetary system. 
E) All countries would adopt the European Exchange Rate Mechanism. 
A) Members could adopt their own exchange systems. 
B) A system of global fixed exchange rates would only be implemented if approved by a vote of 85 percent of membership. 
C) Gold would no longer be a common denominator of the monetary system. 
D) The SDR created by the IMF was recommended as the primary reserve asset of the international monetary system. 
E) All countries would adopt the European Exchange Rate Mechanism.

Question 6

The ______ is the net of merchandise exports and merchandise imports.

Accepted Answer

The answer of The ______ is the net of merchandise...

Question 7

Acquisitions of a foreign company, creation of new manufacturing or research facilities abroad, and expansion of an existing plant in a foreign country are all examples of _____.

Accepted Answer

A) foreign direct investment 
B) a current balance account 
C) a risk premium 
D) a balance of transfers 
E) net financial derivatives 
A) foreign direct investment 
B) a current balance account 
C) a risk premium 
D) a balance of transfers 
E) net financial derivatives

Question 8

When the experts at the Whoppler Firm suggest to a client that it is advisable to engage in arbitrage, what exactly are the experts recommending their client to do?

Accepted Answer

A) Sell goods in lower priced markets to move material throughout the globe 
B) Buy goods in a lower priced market and sell them in a higher priced market in order to make a profit 
C) Sell identical goods for the same prices in differing markets 
D) Buy and sell using only what are considered hard currencies 
E) Avoid transactions involving the use of soft currencies 
A) Sell goods in lower priced markets to move material throughout the globe 
B) Buy goods in a lower priced market and sell them in a higher priced market in order to make a profit 
C) Sell identical goods for the same prices in differing markets 
D) Buy and sell using only what are considered hard currencies 
E) Avoid transactions involving the use of soft currencies

Question 9

Many investors seeking assistance from the Whoppler Firm wish to use the forward market to lock in future exchange rates and ensure against uncertain future currency movements  Which of the following best identifies what these investors are seeking?

Accepted Answer

A)  A hedge 
B) A discount 
C) A spot rate 
D) A bid-ask spread 
E) An indirect quote 
A)  A hedge 
B) A discount 
C) A spot rate 
D) A bid-ask spread 
E) An indirect quote

Question 10

Of the following, which is NOT true about the Bretton Woods System?

Accepted Answer

A) It was established in 1965. 
B) It established a global currency system based on a gold standard with the U.S. dollar pegged at a fixed rate of exchange to gold in an effort to control inflation. 
C) The IMF was established under the Bretton Woods Agreement. 
D) Eventually, major nations met to consider abandoning the Bretton Woods Agreement. 
E) Under the Smithsonian Agreement, the U.S. devalued the dollar against other countries' currencies. 
A) It was established in 1965. 
B) It established a global currency system based on a gold standard with the U.S. dollar pegged at a fixed rate of exchange to gold in an effort to control inflation. 
C) The IMF was established under the Bretton Woods Agreement. 
D) Eventually, major nations met to consider abandoning the Bretton Woods Agreement. 
E) Under the Smithsonian Agreement, the U.S. devalued the dollar against other countries' currencies.

Question 11

Buying goods in a lower priced market and selling them in a higher priced market to make profits is referred to as ______.

Accepted Answer

The answer of Buying goods in a lower priced market...

Question 12

An increase in the prices of goods and services caused by the supply of money exceeding the demand for goods and services is refered to as ______.

Accepted Answer

The answer of An increase in the prices of goods...

Question 13

The financial account of the BOP consists of three subaccounts: (1)U.S.-owned assets abroad, (2)foreign-owned assets in the U.S., and (3)_____.

Accepted Answer

A) a foreign direct investment 
B) a financial account 
C) a risk premium 
D) a balance of transfers 
E) net financial derivatives 
A) a foreign direct investment 
B) a financial account 
C) a risk premium 
D) a balance of transfers 
E) net financial derivatives

Question 14

Scenario - The Whoppler Firm The Whoppler Firm is an experienced financial specialist firm that advises thousands of clients regarding foreign investments and transactions.It takes pride in the accuracy of the financial advice that is provided to its clients and strives to increase the wealth of each participant.  According to the records of the Whoppler Firm, the financial expertise of the company has saved its clients over five million dollars in the last year alone.One of the many factors closely watched by the Whoppler Firm is currency values.  This firm understands these values can change frequently and quickly.  Which one of the following is least likely to be a cause for a currency value to change?

Accepted Answer

A) Price level differences for the same goods and services 
B) Varying interest rates across countries 
C) Varying economic prospects of differing countries 
D) Price imbalances caused by mispricing of goods and services in differing countries 
E) Stable economic and pricing conditions between differing nations 
A) Price level differences for the same goods and services 
B) Varying interest rates across countries 
C) Varying economic prospects of differing countries 
D) Price imbalances caused by mispricing of goods and services in differing countries 
E) Stable economic and pricing conditions between differing nations

Question 15

The net of services exports and imports is called the ______.

Accepted Answer

A) trade balance 
B) services balance 
C) income balance 
D) services deficit 
E) services transfer ratio 
A) trade balance 
B) services balance 
C) income balance 
D) services deficit 
E) services transfer ratio

Question 16

Which of the following regarding potential problems with an IRP is NOT true?

Accepted Answer

A) Evidence on IRP theories is mixed. 
B) Herd behavior can cause large purchases or sales of a particular currency that drive values beyond their normal bounds, resulting in problems such as currency crises. 
C) When interest rates change in the U.S., foreign interest rates should also change under the IRP. However, this may not happen. 
D) International investors may globally diversify their investments and behave passively toward arbitrage activities. 
E) There are no problems with IRP. 
A) Evidence on IRP theories is mixed. 
B) Herd behavior can cause large purchases or sales of a particular currency that drive values beyond their normal bounds, resulting in problems such as currency crises. 
C) When interest rates change in the U.S., foreign interest rates should also change under the IRP. However, this may not happen. 
D) International investors may globally diversify their investments and behave passively toward arbitrage activities. 
E) There are no problems with IRP.

Question 17

The statistical discrepancy line reconciles any remaining imbalance to ensure that all debit and credit entries in the BOP statement sum to zero. This line captures statistical inconsistencies in the recording of the credit and debit entries as well as illegal trade.

Accepted Answer

A) True 
 B)False

Question 18

A statement of account that shows all transactions between the residents of one country and the rest of the world for a given period of time is called balance of ______.

Accepted Answer

The answer of A statement of account that shows all...

Question 19

Scenario - S & I Creations Sven and Ingrid Allgertson developed the idea for their thriving business while awaiting the birth of their first child, Olga.  Finding nowhere to purchase fine handmade baby clothing and other items, the couple decided to start their own business.  Neither Sven nor Ingrid imagined just how successful this endeavor would turn out to be for them. Their designer baby clothes and products were an instant hit in the world marketplace.  And even though the baby items are quite expensive to purchase, shoppers from around the world are only too happy to spend large sums of money on their beloved children. Originally S & I Creations only sold products within Sweden, but soon global demand necessitated the company offer its products in several other foreign markets.  Now the proud parents of baby Olga are also the proud owners of a $10 billion per year business.  Sven and Ingrid cannot wait to see what the future holds for their family and their business operations.S & I Creations is most likely to use which of the following for converting the currency they are paid in from the foreign countries to the currency of Sweden?

Accepted Answer

A) The World Trade Organization 
B) The Foreign Exchange Market 
C) The International Monetary Fund 
D) The International Finance Corporation 
E) The Big Mac Index 
A) The World Trade Organization 
B) The Foreign Exchange Market 
C) The International Monetary Fund 
D) The International Finance Corporation 
E) The Big Mac Index

Question 20

Which of the following is NOT true about the current account balance?

Accepted Answer

A) It is the sum of the trade, services, income, and net transfers balance. 
B) China, France, Japan, and Singapore have consistently had current account surpluses over recent years. 
C) If foreign capital will not be available to finance the U.S. current account deficit, it can be predicted that the dollar will become stronger. 
D) The United States has had large account deficits in recent years. 
E) Countries with current account surpluses generally finance countries with current account deficits. 
A) It is the sum of the trade, services, income, and net transfers balance. 
B) China, France, Japan, and Singapore have consistently had current account surpluses over recent years. 
C) If foreign capital will not be available to finance the U.S. current account deficit, it can be predicted that the dollar will become stronger. 
D) The United States has had large account deficits in recent years. 
E) Countries with current account surpluses generally finance countries with current account deficits.

In this system, a currency's value depends partly upon active government intervention in the foreign exchange market.

According to the Big Mac Index, the dollar interest rate on U.S. and European bonds should be the same. Otherwise, there would be no arbitrage opportunities for investors.

According to the law of one price, identical goods should sell for the same price in different countries according to the local currencies.

Differentiate between hard and soft currencies. Provide an example of each.

Of the following, which is NOT a key principle of the Jamaica Agreement?

The ______ is the net of merchandise exports and merchandise imports.

Acquisitions of a foreign company, creation of new manufacturing or research facilities abroad, and expansion of an existing plant in a foreign country are all examples of _____.

When the experts at the Whoppler Firm suggest to a client that it is advisable to engage in arbitrage, what exactly are the experts recommending their client to do?

Many investors seeking assistance from the Whoppler Firm wish to use the forward market to lock in future exchange rates and ensure against uncertain future currency movements Which of the following best identifies what these investors are seeking?

Of the following, which is NOT true about the Bretton Woods System?

Buying goods in a lower priced market and selling them in a higher priced market to make profits is referred to as ______.

An increase in the prices of goods and services caused by the supply of money exceeding the demand for goods and services is refered to as ______.

The financial account of the BOP consists of three subaccounts: (1)U.S.-owned assets abroad, (2)foreign-owned assets in the U.S., and (3)_____.

The net of services exports and imports is called the ______.

Which of the following regarding potential problems with an IRP is NOT true?

The statistical discrepancy line reconciles any remaining imbalance to ensure that all debit and credit entries in the BOP statement sum to zero. This line captures statistical inconsistencies in the recording of the credit and debit entries as well as illegal trade.

A statement of account that shows all transactions between the residents of one country and the rest of the world for a given period of time is called balance of ______.

Which of the following is NOT true about the current account balance?

The Rise of Globalization

The Evolution of International Business

Regional Economic Integration

The Cultural Environment of Global Business

The Legal, Economic and Political Environment of Global Business

Corruption and Ethics in Global Business

Entry Strategies in Global Business

Control of Global Business

The Organization of Global Business

Global Human Resource Management

Global Marketing

Global Operations and Supply-Chain Management

Global Financial Management

Global Accounting and Taxation

Filters

Exam 4: The International Flow of Funds and Exchange Rates

In this system, a currency's value depends partly upon active government intervention in the foreign exchange market.

According to the Big Mac Index, the dollar interest rate on U.S. and European bonds should be the same. Otherwise, there would be no arbitrage opportunities for investors.

According to the law of one price, identical goods should sell for the same price in different countries according to the local currencies.

Differentiate between hard and soft currencies. Provide an example of each.

Of the following, which is NOT a key principle of the Jamaica Agreement?

The ______ is the net of merchandise exports and merchandise imports.

Acquisitions of a foreign company, creation of new manufacturing or research facilities abroad, and expansion of an existing plant in a foreign country are all examples of _____.

When the experts at the Whoppler Firm suggest to a client that it is advisable to engage in arbitrage, what exactly are the experts recommending their client to do?

Many investors seeking assistance from the Whoppler Firm wish to use the forward market to lock in future exchange rates and ensure against uncertain future currency movements Which of the following best identifies what these investors are seeking?

Of the following, which is NOT true about the Bretton Woods System?

Buying goods in a lower priced market and selling them in a higher priced market to make profits is referred to as ______.

An increase in the prices of goods and services caused by the supply of money exceeding the demand for goods and services is refered to as ______.

The financial account of the BOP consists of three subaccounts: (1)U.S.-owned assets abroad, (2)foreign-owned assets in the U.S., and (3)_____.

The net of services exports and imports is called the ______.

Which of the following regarding potential problems with an IRP is NOT true?

The statistical discrepancy line reconciles any remaining imbalance to ensure that all debit and credit entries in the BOP statement sum to zero. This line captures statistical inconsistencies in the recording of the credit and debit entries as well as illegal trade.

A statement of account that shows all transactions between the residents of one country and the rest of the world for a given period of time is called balance of ______.

Which of the following is NOT true about the current account balance?

The Rise of Globalization

The Evolution of International Business

Regional Economic Integration

The Cultural Environment of Global Business

The Legal, Economic and Political Environment of Global Business

Corruption and Ethics in Global Business

Entry Strategies in Global Business

Control of Global Business

The Organization of Global Business

Global Human Resource Management

Global Marketing

Global Operations and Supply-Chain Management

Global Financial Management

Global Accounting and Taxation

Filters