Question 1

The Basel committee

Accepted Answer

A)  takes advantages of loopholes in multinational banks 
B)  does not support regulatory agencies that monitor the assets of banks' foreign subsidiaries. 
C)  submitted its Concordat in 1975 and was then disbanded. 
D)  continues to be the major forum for cooperation in the regulation of international banking. 
E)  met for the first time in 1975. 
A)  takes advantages of loopholes in multinational banks 
B)  does not support regulatory agencies that monitor the assets of banks' foreign subsidiaries. 
C)  submitted its Concordat in 1975 and was then disbanded. 
D)  continues to be the major forum for cooperation in the regulation of international banking. 
E)  met for the first time in 1975.

Question 2

Using international asset trade, countries can

Accepted Answer

A)  never really eliminate all risk. 
B)  eliminate all risk. 
C)  actually increase their risk in some cases. 
D)  eliminate all their risk except for emerging markets. 
E)  never really diversify their holdings. 
A)  never really eliminate all risk. 
B)  eliminate all risk. 
C)  actually increase their risk in some cases. 
D)  eliminate all their risk except for emerging markets. 
E)  never really diversify their holdings.

Question 3

Credit Suisse, Goldman Sachs, and Lazard Freres are examples of

Accepted Answer

A)  commercial banks. 
B)  corporations. 
C)  non-bank financial institutions, such as insurance companies, pension funds, and mutual funds. This includes investment banks, which specialize in underwriting sales of stocks and bonds by corporations and in some cases governments. 
D)  central banks and other government agencies. 
E)  non-profit organizations. 
A)  commercial banks. 
B)  corporations. 
C)  non-bank financial institutions, such as insurance companies, pension funds, and mutual funds. This includes investment banks, which specialize in underwriting sales of stocks and bonds by corporations and in some cases governments. 
D)  central banks and other government agencies. 
E)  non-profit organizations.

Question 4

Explain the forecast error, ut₊₁, in terms of:
(1)Its equation (what it is equal to)
(2)How it is used
(3)Its accuracy

Accepted Answer

(Et₊₁ - Et)/Et - ( @#IMG-DLM& - Et)/Et this equati

Question 5

Define risk aversion and give an example of a risk-averse person?

Accepted Answer

Risk aversion is a characteris

Question 6

The two types of trade, intertemporal and pure asset swap ________ perfect substitutes, because ________.

Accepted Answer

A)  are; they both offer considerable payoff and are equal in the long run 
B)  are; they both involve the smoothing out of now and future consumption 
C)  are not; asset swapping is immediate and involves only assets, while intertemporal trade takes two time periods and involves both assets and goods/services 
D)  could possibly be; different economic states occur at different points in time 
E)  are not; asset swapping never relates to intertemporal trade 
A)  are; they both offer considerable payoff and are equal in the long run 
B)  are; they both involve the smoothing out of now and future consumption 
C)  are not; asset swapping is immediate and involves only assets, while intertemporal trade takes two time periods and involves both assets and goods/services 
D)  could possibly be; different economic states occur at different points in time 
E)  are not; asset swapping never relates to intertemporal trade

Question 7

What are three things to measure for in evaluating the performance of the capital markets?

Accepted Answer

A)  level of intertemporal trade, international trade, portfolio diversification 
B)  level of portfolio diversification, balanced capital accounts, global inflation 
C)  level of portfolio diversification, intertemporal trade, efficiency of foreign exchange 
D)  onshore-offshore interest rate parity, level of portfolio diversification, stability of eurocurrency market 
E)  onshore-offshore interest rate parity, interest parity and foreign exchange, balanced capital accounts 
A)  level of intertemporal trade, international trade, portfolio diversification 
B)  level of portfolio diversification, balanced capital accounts, global inflation 
C)  level of portfolio diversification, intertemporal trade, efficiency of foreign exchange 
D)  onshore-offshore interest rate parity, level of portfolio diversification, stability of eurocurrency market 
E)  onshore-offshore interest rate parity, interest parity and foreign exchange, balanced capital accounts

Question 8

Why might a country's savings rate have a high positive correlation to its investment rate?

Accepted Answer

A)  A country's gains from intertemporal trade may have been large. 
B)  governments' regulation to avoid inflation 
C)  A country's savings rate and investment rate are generally not positively correlated but rather have negative correlation. 
D)  governments' regulation to avoid large current account balances 
E)  A government has not practiced sufficient fiscal regulation. 
A)  A country's gains from intertemporal trade may have been large. 
B)  governments' regulation to avoid inflation 
C)  A country's savings rate and investment rate are generally not positively correlated but rather have negative correlation. 
D)  governments' regulation to avoid large current account balances 
E)  A government has not practiced sufficient fiscal regulation.

Question 9

A bank faced with a large and sudden loss of deposits is likely to shut down despite a fundamentally sound balance sheet. Why could this be?

Accepted Answer

A)  Banks have accountants that are too optimistic. 
B)  Banks purposely lie about their balance sheets in order to attract more clients. 
C)  Many bank assets are illiquid and cannot be sold quickly to meet deposit obligations without substantial loss to the bank. 
D)  Many banks operate on a budget that exceeds their actual reserves. 
E)  Many banks will shut down to preserve their interest profits. 
A)  Banks have accountants that are too optimistic. 
B)  Banks purposely lie about their balance sheets in order to attract more clients. 
C)  Many bank assets are illiquid and cannot be sold quickly to meet deposit obligations without substantial loss to the bank. 
D)  Many banks operate on a budget that exceeds their actual reserves. 
E)  Many banks will shut down to preserve their interest profits.

Question 10

Which of the following statements is TRUE for the U.S.?

Accepted Answer

A)  Federally chartered banks are required to make contributions to the FDIC to cover the cost of bank deposits insurance. 
B)  Federally chartered banks are not required to make contributions to the FDIC to cover the cost of bank deposits insurance. 
C)  The States are not required to make contributions to the FDIC to cover the cost of bank deposits insurance for banks with their main branch in that State. 
D)  The States are required to make contributions to the FDIC to cover the cost of bank deposits insurance for banks with their main branch in that State. 
E)  The specific municipality where the main branch of the bank is located is required to make contributions to the FDIC to cover the cost of bank deposits insurance. 
A)  Federally chartered banks are required to make contributions to the FDIC to cover the cost of bank deposits insurance. 
B)  Federally chartered banks are not required to make contributions to the FDIC to cover the cost of bank deposits insurance. 
C)  The States are not required to make contributions to the FDIC to cover the cost of bank deposits insurance for banks with their main branch in that State. 
D)  The States are required to make contributions to the FDIC to cover the cost of bank deposits insurance for banks with their main branch in that State. 
E)  The specific municipality where the main branch of the bank is located is required to make contributions to the FDIC to cover the cost of bank deposits insurance.

Question 11

What structures make up the international capital markets?

Accepted Answer

A)  stock market, IFM, and the World bank 
B)  bond market, foreign exchange rates, IFM, and the World bank 
C)  commercial banks, corporations, non-bank financial institutions, the central banks, and other government agencies 
D)  commercial banks and corporations 
E)  the central banks and non-bank financial institutions 
A)  stock market, IFM, and the World bank 
B)  bond market, foreign exchange rates, IFM, and the World bank 
C)  commercial banks, corporations, non-bank financial institutions, the central banks, and other government agencies 
D)  commercial banks and corporations 
E)  the central banks and non-bank financial institutions

Question 12

Explain why a London Eurobank has a competitive advantage over a bank in New York in attracting dollar deposits.

Accepted Answer

It can pay more because the Lo

Question 13

Suppose you are offered a gamble in which you win $1,000 1/3 of the time but lose $800 2/3 of the time. If you are risk lover will you take the gamble?
 What will your expected payoff be?

Accepted Answer

The expected payoff would be:
1/3 (+$1,0

Question 14

What is securitization?

Accepted Answer

The term refers to financial instrument

Question 15

Why is portfolio diversification so important in international trade?

Accepted Answer

Portfolio diversification is important i

Question 16

Assume interest parity holds. Calculate for each of the following cases.

Accepted Answer

The answer of Assume interest parity holds. Calculate for each...

Question 17

Discuss studies based on the interest parity conditions.

Accepted Answer

In general, the formula does n

Question 18

What caused a major economic shock in August 2007?

Accepted Answer

A)  U.S. mortgage market 
B)  war in Iraq 
C)  U.S. bond market 
D)  technology stocks 
E)  misreporting from Asian markets 
A)  U.S. mortgage market 
B)  war in Iraq 
C)  U.S. bond market 
D)  technology stocks 
E)  misreporting from Asian markets

Question 19

Large differences in interest rates between countries would indicate that

Accepted Answer

A)  the global market is thriving. 
B)  there is good communication between countries about potential global investment opportunities. 
C)  there are unrealized gains from trade. 
D)  the market is in danger of collapse. 
E)  the supply growth exceeds the aggregate demand. 
A)  the global market is thriving. 
B)  there is good communication between countries about potential global investment opportunities. 
C)  there are unrealized gains from trade. 
D)  the market is in danger of collapse. 
E)  the supply growth exceeds the aggregate demand.

Question 20

The international capital market is:

Accepted Answer

A)  the international currency exchange. 
B)  a market in which capital assets are exchanged for services. 
C)  the market that is subject to intense regulation and must file a report to the Basel committee on a biannual basis. 
D)  not really a single market, but a group of closely interconnected markets in which asset exchanges with some international dimension take place. 
E)  an organization of fiscal policies that dictate international trade. 
A)  the international currency exchange. 
B)  a market in which capital assets are exchanged for services. 
C)  the market that is subject to intense regulation and must file a report to the Basel committee on a biannual basis. 
D)  not really a single market, but a group of closely interconnected markets in which asset exchanges with some international dimension take place. 
E)  an organization of fiscal policies that dictate international trade.

Exam 20: Financial Globalization: Opportunity and Crisis

The Basel committee

Using international asset trade, countries can

Credit Suisse, Goldman Sachs, and Lazard Freres are examples of

Explain the forecast error, ut₊₁, in terms of: (1)Its equation (what it is equal to) (2)How it is used (3)Its accuracy

Define risk aversion and give an example of a risk-averse person?

The two types of trade, intertemporal and pure asset swap ________ perfect substitutes, because ________.

What are three things to measure for in evaluating the performance of the capital markets?

Why might a country's savings rate have a high positive correlation to its investment rate?

A bank faced with a large and sudden loss of deposits is likely to shut down despite a fundamentally sound balance sheet. Why could this be?

Which of the following statements is TRUE for the U.S.?

What structures make up the international capital markets?

Explain why a London Eurobank has a competitive advantage over a bank in New York in attracting dollar deposits.

Suppose you are offered a gamble in which you win $1,000 1/3 of the time but lose $800 2/3 of the time. If you are risk lover will you take the gamble? What will your expected payoff be?

What is securitization?

Why is portfolio diversification so important in international trade?

Assume interest parity holds. Calculate for each of the following cases.

Discuss studies based on the interest parity conditions.

What caused a major economic shock in August 2007?

Large differences in interest rates between countries would indicate that

The international capital market is:

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

Filters

The two types of trade, intertemporal and pure asset swap perfect substitutes, because .