Question 1

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

Accepted Answer

PPP overlooks the human aspect of exchan

Question 2

Low unemployment rates can lead to higher inflation.

Accepted Answer

A) True 
 B)False

Question 3

Differentiate between efficient and inefficient market views and discuss the implications of the two schools of thought for companies.

Accepted Answer

A great deal of debate revolves around t

Question 4

A ________ is a monetary regime that is based on an explicit commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate.

Accepted Answer

A) currency option 
B) currency board 
C) currency speculation 
D) currency arbitrage 
A) currency option 
B) currency board 
C) currency speculation 
D) currency arbitrage

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

Predictable exchange rates increase the need for currency hedging.

Accepted Answer

A) True 
 B)False

Question 7

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.
-Suppose Country A has a currency called the Pulse (P).At the beginning of the year,the exchange rate between the Pulse and the U.S.dollar was P150/$.The inflation rate in Country A is running at an annual rate of 250 percent,whereas inflation in the U.S.is running at 2 percent.Which of the following would most likely be the new exchange rate that Color-Me-Green can expect at the end of the year?

Accepted Answer

A) P525/$ 
B) P514.70/$ 
C) P43.71/$ 
D) $43.71/P 
A) P525/$ 
B) P514.70/$ 
C) P43.71/$ 
D) $43.71/P

Question 8

Currency devaluation increases consumers' buying power.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

The Bretton Woods Agreement was an accord among nations to create a new international monetary system based on the value of the U.S.dollar.

Accepted Answer

A) True 
 B)False

Question 12

The ________ is the collection of agreements and institutions that govern exchange rates.

Accepted Answer

A) Bretton Woods Agreement 
B) Plaza Accord 
C) international monetary system 
D) international bond market 
A) Bretton Woods Agreement 
B) Plaza Accord 
C) international monetary system 
D) international bond market

Question 13

A company selling in a country with a strong currency while sourcing from a country with a weak currency ________.

Accepted Answer

A) practices unethical conduct 
B) experiences a trade deficit 
C) ends up bankrupt 
D) improves its profits 
A) practices unethical conduct 
B) experiences a trade deficit 
C) ends up bankrupt 
D) improves its profits

Question 14

Purchasing power parity is better at predicting ________ exchange rates.

Accepted Answer

A) cross 
B) spot 
C) short-term 
D) long-term 
A) cross 
B) spot 
C) short-term 
D) long-term

Question 15

The value of a currency expressed in dollars is called its par value.

Accepted Answer

A) True 
 B)False

Question 16

It the actual euro/dollar exchange rate on currency markets is €1.2/$,and a kilogram of wheat still costs $1 in the U.S.and €1.5 in France,Sam also knows that the price of a kilogram of wheat in France is ________.

Accepted Answer

A) $1.25 
B) $)80 
C) €)80 
D) €1.2 
A) $1.25 
B) $)80 
C) €)80 
D) €1.2

Question 17

Which of the following was an advantage of the gold standard?

Accepted Answer

A) It retained trade imbalances. 
B) It abolished monetary policies on all countries. 
C) It reduced the risk in exchange rates. 
D) It increased exchange-rate fluctuations. 
A) It retained trade imbalances. 
B) It abolished monetary policies on all countries. 
C) It reduced the risk in exchange rates. 
D) It increased exchange-rate fluctuations.

Question 18

The international monetary system created by the Bretton Woods Agreement collapsed because ________.

Accepted Answer

A) of its heavy dependence on the stability of the dollar 
B) it was not accepted by a majority of the world's nations 
C) it did not have the funds necessary for its functioning 
D) it favored only the developed countries and was of no help to struggling nations 
A) of its heavy dependence on the stability of the dollar 
B) it was not accepted by a majority of the world's nations 
C) it did not have the funds necessary for its functioning 
D) it favored only the developed countries and was of no help to struggling nations

Question 19

The ________ was a 1985 agreement among the G5 nations to act together in forcing down the value of the U.S.dollar.

Accepted Answer

A) Bretton Woods Agreement 
B) Smithsonian Agreement 
C) Plaza Accord 
D) Louvre Accord 
A) Bretton Woods Agreement 
B) Smithsonian Agreement 
C) Plaza Accord 
D) Louvre Accord

Question 20

Which of the following represents the Fisher effect?

Accepted Answer

A) Cross Rate = Real Interest Rate + Nominal Interest Rate 
B) Real Interest Rate = Nominal Interest Rate + Spot Rate 
C) Nominal Interest Rate = Real Interest Rate + Inflation Rate 
D) Real Interest Rate = Nominal Interest Rate + Unemployment Rate 
A) Cross Rate = Real Interest Rate + Nominal Interest Rate 
B) Real Interest Rate = Nominal Interest Rate + Spot Rate 
C) Nominal Interest Rate = Real Interest Rate + Inflation Rate 
D) Real Interest Rate = Nominal Interest Rate + Unemployment Rate

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

Low unemployment rates can lead to higher inflation.

Differentiate between efficient and inefficient market views and discuss the implications of the two schools of thought for companies.

A ________ is a monetary regime that is based on an explicit commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate.

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?

Predictable exchange rates increase the need for currency hedging.

Currency devaluation increases consumers' buying power.

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

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

The Bretton Woods Agreement was an accord among nations to create a new international monetary system based on the value of the U.S.dollar.

The ________ is the collection of agreements and institutions that govern exchange rates.

A company selling in a country with a strong currency while sourcing from a country with a weak currency ________.

Purchasing power parity is better at predicting ________ exchange rates.

The value of a currency expressed in dollars is called its par value.

It the actual euro/dollar exchange rate on currency markets is €1.2/$,and a kilogram of wheat still costs $1 in the U.S.and €1.5 in France,Sam also knows that the price of a kilogram of wheat in France is ________.

Which of the following was an advantage of the gold standard?

The international monetary system created by the Bretton Woods Agreement collapsed because ________.

The ________ was a 1985 agreement among the G5 nations to act together in forcing down the value of the U.S.dollar.

Which of the following represents the Fisher effect?

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

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

Low unemployment rates can lead to higher inflation.

Differentiate between efficient and inefficient market views and discuss the implications of the two schools of thought for companies.

A ________ is a monetary regime that is based on an explicit commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate.

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?

Predictable exchange rates increase the need for currency hedging.

Currency devaluation increases consumers' buying power.

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

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

The Bretton Woods Agreement was an accord among nations to create a new international monetary system based on the value of the U.S.dollar.

The ________ is the collection of agreements and institutions that govern exchange rates.

A company selling in a country with a strong currency while sourcing from a country with a weak currency ________.

Purchasing power parity is better at predicting ________ exchange rates.

The value of a currency expressed in dollars is called its par value.

It the actual euro/dollar exchange rate on currency markets is €1.2/$,and a kilogram of wheat still costs $1 in the U.S.and €1.5 in France,Sam also knows that the price of a kilogram of wheat in France is ________.

Which of the following was an advantage of the gold standard?

The international monetary system created by the Bretton Woods Agreement collapsed because ________.

The ________ was a 1985 agreement among the G5 nations to act together in forcing down the value of the U.S.dollar.

Which of the following represents the Fisher effect?

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