Question 1

The intentional lowering of the value of a currency by a nation's government is called devaluation.

Accepted Answer

A) True 
 B)False  True

Question 2

In the earliest days of international trade,________ was the internationally accepted currency for payment of goods and services.

Accepted Answer

A)  British pound 
B)  U.S. dollar 
C)  silver 
D)  gold 
A)  British pound 
B)  U.S. dollar 
C)  silver 
D)  gold D

Question 3

Discuss the challenges involved in forecasting exchange rates.

Accepted Answer

The business of forecasting exchange rates is a rapidly growing industry.This trend seems to provide evidence that a growing number of people believe it is possible to improve on the forecasts of exchange rates embodied in forward rates.Difficulties of forecasting remain,however.Despite highly sophisticated statistical techniques in the hands of well-trained analysts,forecasting is not a pure science.Few,if any,forecasts are ever completely accurate because of unexpected events that occur throughout the forecast period.
Beyond the problems associated with the data used by these techniques,failings can be traced to the human element involved in forecasting.For example,people might miscalculate the importance of economic news becoming available to the market,placing too much emphasis on some elements and ignoring others.

Question 4

Describe the most important features of the international monetary system created by the Bretton Woods Agreement.

Accepted Answer

In 1944,representatives from 44 nations

Question 5

The exchange rate at the beginning of a year between the Indian Rupee (R)and the U.S.dollar is R43.125/$.The annual inflation rates in India and in the United States are 19 percent and 3 percent respectively.What would be the new exchange rate at the end of the year?

Accepted Answer

A)  R49.8224/$ 
B)  R37.327/$ 
C)  R0.0267/$ 
D)  $37.327/R 
A)  R49.8224/$ 
B)  R37.327/$ 
C)  R0.0267/$ 
D)  $37.327/R

Question 6

Devaluation of a nation's currency ________.

Accepted Answer

A)  gives foreign companies in the country an edge over domestic companies 
B)  leads to a decline in the supply of goods and services 
C)  lowers the price of a country's exports 
D)  increases consumers' buying power 
A)  gives foreign companies in the country an edge over domestic companies 
B)  leads to a decline in the supply of goods and services 
C)  lowers the price of a country's exports 
D)  increases consumers' buying power

Question 7

The European monetary system is still in practice today.

Accepted Answer

A) True 
 B)False

Question 8

According to Fisher effect,real interest rate is the sum of the nominal interest rate and the expected rate of inflation over a specific period.

Accepted Answer

A) True 
 B)False

Question 9

Scenario: Color-Me-Green Inc.
Color-Me-Green Inc., a U.S.-based clothing merchant, has started doing business internationally. Having subsidiaries in several countries, the company must integrate financial information from all its subsidiaries with the U.S. home office at the end of the year.
-In an attempt to raise money in Country B,Color-Me-Green was quoted an interest rate of 14 percent by a local bank.This quoted rate is called the ________ rate.

Accepted Answer

A)  cross 
B)  artificial 
C)  nominal 
D)  exchange 
A)  cross 
B)  artificial 
C)  nominal 
D)  exchange

Question 10

Which of the following features did Bretton Woods Agreement incorporate in the international monetary system based on the U.S.dollar?

Accepted Answer

A)  floating exchange rates 
B)  trade imbalance corrections 
C)  an enforcement mechanism 
D)  a strict ban on devaluation 
A)  floating exchange rates 
B)  trade imbalance corrections 
C)  an enforcement mechanism 
D)  a strict ban on devaluation

Question 11

Currency devaluation decreases the consumers' buying power in the country whose currency is being devalued.

Accepted Answer

A) True 
 B)False

Question 12

Discuss the role of business confidence and psychology in currency values.

Accepted Answer

PPP overlooks the human aspect of exchan

Question 13

Scenario: Sam Dearing, Budding International Financier
Sam Dearing is a summer intern in the arbitrage department at a prestigious Wall Street firm. Sam is hoping to be offered a full-time position at the firm after he graduates from college, and therefore, Sam knows that he must demonstrate a strong understanding of how exchange rates work.
-Sam's mentor at the firm told him that the ________ stipulates that an identical product must have an identical price in all countries when the price is expressed in a common currency.

Accepted Answer

A)  exchange price 
B)  law of one price 
C)  fixed exchange-rate system 
D)  floating exchange-rate system 
A)  exchange price 
B)  law of one price 
C)  fixed exchange-rate system 
D)  floating exchange-rate system

Question 14

Fluctuating exchange rates increase the need for currency hedging.

Accepted Answer

A) True 
 B)False

Question 15

When the value of a country's currency declines,the price of its ________.

Accepted Answer

A)  exports and imports on world markets declines 
B)  exports and imports on world markets increases 
C)  exports on world markets declines and the price of its imports increases 
D)  exports on world markets increases and the price of its imports declines 
A)  exports and imports on world markets declines 
B)  exports and imports on world markets increases 
C)  exports on world markets declines and the price of its imports increases 
D)  exports on world markets increases and the price of its imports declines

Question 16

The gold standard is a ________ because it secured nations' currencies to the value of gold.

Accepted Answer

A)  floating exchange-rate system 
B)  fixed exchange-rate system 
C)  linked exchange-rate system 
D)  free float system 
A)  floating exchange-rate system 
B)  fixed exchange-rate system 
C)  linked exchange-rate system 
D)  free float system

Question 17

The ________ is an IMF asset whose value is based on a weighted basket of four currencies,including the U.S.dollar,European Union euro,Japanese yen,and British pound.

Accepted Answer

A)  special drawing right 
B)  gold standard 
C)  Eurobond 
D)  currency board 
A)  special drawing right 
B)  gold standard 
C)  Eurobond 
D)  currency board

Question 18

Briefly describe how exchange rates influence business activities.

Accepted Answer

Movement in a currency's exchange rate a

Question 19

The value of a currency expressed in relation to the currency of another country is called the exchange rate.

Accepted Answer

A) True 
 B)False

Question 20

Fundamental analyses used for forecasting exchange rates estimate the timing,magnitude,and direction of future exchange rate changes.

Accepted Answer

A) True 
 B)False

The intentional lowering of the value of a currency by a nation's government is called devaluation.

In the earliest days of international trade,________ was the internationally accepted currency for payment of goods and services.

Discuss the challenges involved in forecasting exchange rates.

Describe the most important features of the international monetary system created by the Bretton Woods Agreement.

The exchange rate at the beginning of a year between the Indian Rupee (R)and the U.S.dollar is R43.125/$.The annual inflation rates in India and in the United States are 19 percent and 3 percent respectively.What would be the new exchange rate at the end of the year?

Devaluation of a nation's currency ________.

The European monetary system is still in practice today.

According to Fisher effect,real interest rate is the sum of the nominal interest rate and the expected rate of inflation over a specific period.

Which of the following features did Bretton Woods Agreement incorporate in the international monetary system based on the U.S.dollar?

Currency devaluation decreases the consumers' buying power in the country whose currency is being devalued.

Discuss the role of business confidence and psychology in currency values.

Fluctuating exchange rates increase the need for currency hedging.

When the value of a country's currency declines,the price of its ________.

The gold standard is a ________ because it secured nations' currencies to the value of gold.

The ________ is an IMF asset whose value is based on a weighted basket of four currencies,including the U.S.dollar,European Union euro,Japanese yen,and British pound.

Briefly describe how exchange rates influence business activities.

The value of a currency expressed in relation to the currency of another country is called the exchange rate.

Fundamental analyses used for forecasting exchange rates estimate the timing,magnitude,and direction of future exchange rate changes.

Globalization

Cross-Cultural Business

Political Economy and Ethics

Economic Development of Nations

International Trade Theory

Political Economy of Trade

Foreign Direct Investment

Regional Economic Integration

International Financial Markets

International Strategy and Organization

Analyzing International Opportunities

Selecting and Managing Entry Modes

Developing and Marketing Products

Managing International Operations

Hiring and Managing Employees

Filters

Exam 10: International Monetary System

The intentional lowering of the value of a currency by a nation's government is called devaluation.

In the earliest days of international trade,________ was the internationally accepted currency for payment of goods and services.

Discuss the challenges involved in forecasting exchange rates.

Describe the most important features of the international monetary system created by the Bretton Woods Agreement.

The exchange rate at the beginning of a year between the Indian Rupee (R)and the U.S.dollar is R43.125/$.The annual inflation rates in India and in the United States are 19 percent and 3 percent respectively.What would be the new exchange rate at the end of the year?

Devaluation of a nation's currency ________.

The European monetary system is still in practice today.

According to Fisher effect,real interest rate is the sum of the nominal interest rate and the expected rate of inflation over a specific period.

Which of the following features did Bretton Woods Agreement incorporate in the international monetary system based on the U.S.dollar?

Currency devaluation decreases the consumers' buying power in the country whose currency is being devalued.

Discuss the role of business confidence and psychology in currency values.

Fluctuating exchange rates increase the need for currency hedging.

When the value of a country's currency declines,the price of its ________.

The gold standard is a ________ because it secured nations' currencies to the value of gold.

The ________ is an IMF asset whose value is based on a weighted basket of four currencies,including the U.S.dollar,European Union euro,Japanese yen,and British pound.

Briefly describe how exchange rates influence business activities.

The value of a currency expressed in relation to the currency of another country is called the exchange rate.

Fundamental analyses used for forecasting exchange rates estimate the timing,magnitude,and direction of future exchange rate changes.

Globalization

Cross-Cultural Business

Political Economy and Ethics

Economic Development of Nations

International Trade Theory

Political Economy of Trade

Foreign Direct Investment

Regional Economic Integration

International Financial Markets

International Strategy and Organization

Analyzing International Opportunities

Selecting and Managing Entry Modes

Developing and Marketing Products

Managing International Operations

Hiring and Managing Employees

Filters