Exam 4: The International Flow of Funds and Exchange Rates

Which of the following statements is NOT true about the global economic and financial crises of 2008-2009?

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 _____.

A system that determines the value of some currencies partly by demand and supply in the foreign exchange market, and partly by active government intervention in the foreign exchange market is called a ________.

"Fortunately both purchasing power parity and interest rate parity does not have any problems." Do you agree with this statement? Defend your position.

An example of inflation is, if the amount of money in a country doubled, but the production of goods and services stayed the same, the price of all goods and services would decline by about half, assuming that other factors, such as external trade, were constant.

The net of transfer payments going overseas and inflows from abroad is referred to as the ______.

One factor affecting change in currency values is different price levels in different countries for the same goods and services.

The net of transfer payments going overseas and inflows from abroad is called the _____.

The ______ is the net of investment income from abroad and investment payments to foreigners.

The system in which the country pegs its currency at a fixed rate to a major currency or basket of currencies, while the exchange rate fluctuates within a narrow margin around a central rate is called a(n)_____.

The EMU introduced the euro as a new currency to replace the currencies of the member countries in the Eurozone, which has since grown to 29 members.

In a free-market-oriented foreign exchange market, major currency values are determined by the demand for and supply of currencies; this is called the fixed floating exchange rate system.

The ______ is a principle implying that forward exchange rates and spot exchange rates set interest rates on bonds in different countries equal to one another.

In the forward market, the selling of a currency at a spot rate that is less than the forward rate refers to a ______..

Of the following, which is NOT an example of a foreign direct investment?

In flow of funds analysis, money moving into a country is a debit (negative sign), while money leaving the same country is a credit (plus sign).

The 1944 decision to establish a global currency system with the U.S. dollar pegged at a fixed rate of exchange to gold, and the currencies of 43 other countries fixed to the dollar is known as the ________.

______ refers to the reciprocal of the direct quote, or the prices of a dollar (for example)in foreign currency terms.

Whether the trade balance is positive (surplus)or negative (deficit)is important because it provides a measure of the financing needs of a particular country. Hence, the trade balance is more important than current account balance.

Insurance that reduces future risk is refered to as a _______.