Question 1

Statistical studies of the relationship between interest rates and later depreciation rates show that

Accepted Answer

A)  the interest difference has been a very bad predictor in the large swings of exchange rates. 
B)  the interest difference has been an accurate predictor in the large swings of exchange rates. 
C)  the interest difference has correctly predicted the direction in which exchange rates would change. 
D)  the interest difference has not yet been studied as a predictor in the large swings of exchange rates. 
E)  the interest difference is unrelated to the large swings of exchange rates. 
A)  the interest difference has been a very bad predictor in the large swings of exchange rates. 
B)  the interest difference has been an accurate predictor in the large swings of exchange rates. 
C)  the interest difference has correctly predicted the direction in which exchange rates would change. 
D)  the interest difference has not yet been studied as a predictor in the large swings of exchange rates. 
E)  the interest difference is unrelated to the large swings of exchange rates.

Question 2

Complete the following table.

Accepted Answer

The answer of Complete the following table.
  ...

Question 3

Asset trades that deal with equity instruments are best described as

Accepted Answer

A)  share of stock. 
B)  exchange rate. 
C)  bonds. 
D)  bank deposits. 
E)  factors. 
A)  share of stock. 
B)  exchange rate. 
C)  bonds. 
D)  bank deposits. 
E)  factors.

Question 4

Explain the issues involved with the Fed acting as a Lender of Last Resort (LLR).

Accepted Answer

On the one hand, LLR enables t

Question 5

If you are offered a gamble in which you win 500 dollars 3/8 of the time and you lose 500 dollars 5/8 of the time, what is your expected payoff and your behavior given that you are a risk-lover?

Accepted Answer

A)  $500, take the gamble 
B)  -$125, take the gamble 
C)  -$125, it is unclear what you would do without further information 
D)  $500, decline the gamble 
E)  -$125, decline the gamble 
A)  $500, take the gamble 
B)  -$125, take the gamble 
C)  -$125, it is unclear what you would do without further information 
D)  $500, decline the gamble 
E)  -$125, decline the gamble

Question 6

Explain what Eurocurrencies are and why they are significant.

Accepted Answer

Eurocurrencies are offshore currency dep

Question 7

Which statement is NOT true regarding emerging markets?

Accepted Answer

A)  Emerging market financial institutions have generally proven to be weaker than those in industrialized countries. 
B)  Emerging markets are the capital markets of poorer, developing countries that have liberalized their financial system to allow private asset trade with foreigners. 
C)  Countries with emerging markets include Brazil, Mexico, and Thailand. 
D)  Countries with emerging markets have been unable to liberalize their financial systems to allow private trade with foreigners. 
E)  Emerging market financial institutions contributed to the financial crisis of 1997-1999. 
A)  Emerging market financial institutions have generally proven to be weaker than those in industrialized countries. 
B)  Emerging markets are the capital markets of poorer, developing countries that have liberalized their financial system to allow private asset trade with foreigners. 
C)  Countries with emerging markets include Brazil, Mexico, and Thailand. 
D)  Countries with emerging markets have been unable to liberalize their financial systems to allow private trade with foreigners. 
E)  Emerging market financial institutions contributed to the financial crisis of 1997-1999.

Question 8

The leading center of Eurocurrency trading is

Accepted Answer

A)  New York City. 
B)  Chicago. 
C)  London. 
D)  Paris. 
E)  Frankfurt. 
A)  New York City. 
B)  Chicago. 
C)  London. 
D)  Paris. 
E)  Frankfurt.

Question 9

The main problem with securitization is that

Accepted Answer

A)  governments are no longer able to repackage bank assets. 
B)  securitized banks grow too large and create oligopolies. 
C)  There is no problem. Governments can still get an accurate picture of global financial flows by simply examining bank balance sheets. 
D)  governments are not able to monitor bank assets or to asses a bank's risk to the soundness of the international banking system. 
E)  the bank assets are not marketable. 
A)  governments are no longer able to repackage bank assets. 
B)  securitized banks grow too large and create oligopolies. 
C)  There is no problem. Governments can still get an accurate picture of global financial flows by simply examining bank balance sheets. 
D)  governments are not able to monitor bank assets or to asses a bank's risk to the soundness of the international banking system. 
E)  the bank assets are not marketable.

Question 10

What do you expect would be the effects of 9/11 on the size of the Eurocurrency markets?

Accepted Answer

Will increase due to fear that

Question 11

The scale of transactions in the international capital market has

Accepted Answer

A)  grown more quickly than world GDP since the early 1970s. 
B)  grown less quickly than world GDP since the early 1970s. 
C)  grown about the same rate as the world GDP since the early 1970s. 
D)  been fixed by international regulations. 
E)  decreased more quickly than world GDP since the early 1970s. 
A)  grown more quickly than world GDP since the early 1970s. 
B)  grown less quickly than world GDP since the early 1970s. 
C)  grown about the same rate as the world GDP since the early 1970s. 
D)  been fixed by international regulations. 
E)  decreased more quickly than world GDP since the early 1970s.

Question 12

"The internationalization of banking has weakened national safeguards against banking collapse, but at the same time it has made the need for effective safeguards more urgent." Discuss.

Accepted Answer

True. Students should elaborate on:
(1)

Question 13

In the U.S., banks

Accepted Answer

A)  cannot be forced to sell assets that the bank examiner deems too risky. 
B)  can be forced to sell assets that the bank examiner deems too risky. 
C)  can be forced to sell assets that the bank examiner deems too risky only after a court order. 
D)  can be forced to sell assets that the bank examiner deems too risky only after both examiners from the Fed and from the FDIC agree. 
E)  can be forced to trade assets that the bank examiner deems too risky. 
A)  cannot be forced to sell assets that the bank examiner deems too risky. 
B)  can be forced to sell assets that the bank examiner deems too risky. 
C)  can be forced to sell assets that the bank examiner deems too risky only after a court order. 
D)  can be forced to sell assets that the bank examiner deems too risky only after both examiners from the Fed and from the FDIC agree. 
E)  can be forced to trade assets that the bank examiner deems too risky.

Question 14

Complete the following table.

Accepted Answer

The answer of Complete the following table.
  ...

Question 15

"There is evidence that the string of U.S. bank closings in the early 1930s helped start and worsen the Great Depression." Discuss.

Accepted Answer

Bank failure can harm the economy's macr

Question 16

Regulatory asymmetries can explain why the following places have become main Eurocurrency centers

Accepted Answer

A)  the United States. 
B)  Germany. 
C)  Zurich, Somalia, and Mozambique. 
D)  London, Luxembourg, and The United States. 
E)  London, Luxembourg, and Hong Kong. 
A)  the United States. 
B)  Germany. 
C)  Zurich, Somalia, and Mozambique. 
D)  London, Luxembourg, and The United States. 
E)  London, Luxembourg, and Hong Kong.

Question 17

Why is the foreign exchange market so vital?

Accepted Answer

The foreign exchange market is the centr

Question 18

A business's use of a bank located outside of the home country is called

Accepted Answer

A)  Swiss banking. 
B)  offshore banking. 
C)  international banking. 
D)  domestic banking. 
E)  international swapping. 
A)  Swiss banking. 
B)  offshore banking. 
C)  international banking. 
D)  domestic banking. 
E)  international swapping.

Question 19

What are the three types of transactions between the residents of different countries?

Accepted Answer

The three types are:
(1) Trade

Question 20

The following simple two-country question illustrates how countries are made better off by trade in assets. Imagine that there are two countries, Home and Foreign, and that residents of each own only one asset, domestic land yielding an annual harvest of kiwi fruit. Assume that the yield on the land is uncertain. Half the time, Home's land yields a harvest of 100 tons of kiwi fruit at the same time as Foreign's land yields a harvest of 50 tons. The other half of the time the outcomes are reversed. The Foreign's harvest is 100 tons, but the Home harvest is only 50.
-Suppose the two countries can trade shares in the ownership of their perspective assets without any restrictions. Assume that the consumers in both countries would like to totally smooth their consumption. Describe the outcomes.

Accepted Answer

In this case, Home residents will buy a

Exam 20: Financial Globalization: Opportunity and Crisis

Statistical studies of the relationship between interest rates and later depreciation rates show that

Complete the following table.

Asset trades that deal with equity instruments are best described as

Explain the issues involved with the Fed acting as a Lender of Last Resort (LLR).

If you are offered a gamble in which you win 500 dollars 3/8 of the time and you lose 500 dollars 5/8 of the time, what is your expected payoff and your behavior given that you are a risk-lover?

Explain what Eurocurrencies are and why they are significant.

Which statement is NOT true regarding emerging markets?

The leading center of Eurocurrency trading is

The main problem with securitization is that

What do you expect would be the effects of 9/11 on the size of the Eurocurrency markets?

The scale of transactions in the international capital market has

"The internationalization of banking has weakened national safeguards against banking collapse, but at the same time it has made the need for effective safeguards more urgent." Discuss.

In the U.S., banks

Complete the following table.

"There is evidence that the string of U.S. bank closings in the early 1930s helped start and worsen the Great Depression." Discuss.

Regulatory asymmetries can explain why the following places have become main Eurocurrency centers

Why is the foreign exchange market so vital?

A business's use of a bank located outside of the home country is called

What are the three types of transactions between the residents of different countries?

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

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