Question 1

After Bretton Woods period,countries chose to control

Accepted Answer

A) fixed exchange rate only. 
B) monetary policy oriented toward domestic goals only. 
C) freedom of international capital movements only. 
D) fixed exchange rate and freedom of international capital movements. 
E) fixed exchange rate and monetary policy oriented toward domestic goals. 
A) fixed exchange rate only. 
B) monetary policy oriented toward domestic goals only. 
C) freedom of international capital movements only. 
D) fixed exchange rate and freedom of international capital movements. 
E) fixed exchange rate and monetary policy oriented toward domestic goals.

Question 2

Eurobanks are

Accepted Answer

A) all European Banks. 
B) all non American banks. 
C) banks that accept deposits denominated in Eurocurrencies excluding Eurodollars. 
D) banks that accept deposits denominated in Eurocurrencies including Eurodollars. 
E) banks that do not take U.S.dollars. 
A) all European Banks. 
B) all non American banks. 
C) banks that accept deposits denominated in Eurocurrencies excluding Eurodollars. 
D) banks that accept deposits denominated in Eurocurrencies including Eurodollars. 
E) banks that do not take U.S.dollars.

Question 3

If a country chooses to have a monetary policy oriented toward domestic goals and a fixed exchange rate,then

Accepted Answer

A) it can have the freedom of international capital movements. 
B) it cannot have the freedom of international capital movements. 
C) it cannot balance its current account. 
D) it cannot have fiscal policy oriented toward domestic goals. 
E) it cannot control money supply growth. 
A) it can have the freedom of international capital movements. 
B) it cannot have the freedom of international capital movements. 
C) it cannot balance its current account. 
D) it cannot have fiscal policy oriented toward domestic goals. 
E) it cannot control money supply growth.

Question 4

"It is in the interest of each depositor to withdraw her money from a bank if all other depositors are doing the same,even when the bank's assets are sound." Discuss.As part of your answer clearly state whether the statement is true or false.

Accepted Answer

True.Students should elaborate

Question 5

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

Accepted Answer

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

Question 6

Under a gold standard,countries control

Accepted Answer

A) its flexible exchange rate. 
B) monetary policy oriented toward domestic goals. 
C) international capital movements. 
D) foreign inflationary policies. 
E) and avoid risks in international trade. 
A) its flexible exchange rate. 
B) monetary policy oriented toward domestic goals. 
C) international capital movements. 
D) foreign inflationary policies. 
E) and avoid risks in international trade.

Question 7

Banks in the U.S.

Accepted Answer

A) cannot hold common stocks. 
B) can hold common stocks. 
C) cannot hold common stocks of companies they do business with. 
D) cannot hold common stocks of companies that have their headquarters in the same state. 
E) can hold risky assets. 
A) cannot hold common stocks. 
B) can hold common stocks. 
C) cannot hold common stocks of companies they do business with. 
D) cannot hold common stocks of companies that have their headquarters in the same state. 
E) can hold risky assets.

Question 8

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 9

Suppose one is offered a gamble in which you win $1,000 half the time but lose $1,000 half the time.Since in this case one is as likely to win as to lose the $1,000,the average payoff on this gamble-its expected value-is: 0.5 ∗ $1,000 + 0.5 ∗ (-$1,000)= 0.
Under such circumstances:

Accepted Answer

A) no one will take the gamble. 
B) risk averse individuals will take the gamble. 
C) risk lovers individuals will not take the gamble. 
D) risk neutral individuals will not take the gamble. 
E) risk lovers and risk neutral individuals may take the gamble. 
A) no one will take the gamble. 
B) risk averse individuals will take the gamble. 
C) risk lovers individuals will not take the gamble. 
D) risk neutral individuals will not take the gamble. 
E) risk lovers and risk neutral individuals may take the gamble.

Question 10

Explain why the FDIC is following a "too-big-to-fail" policy of fully protecting all depositors at the largest banks.

Accepted Answer

A tricky question.The FDIC does that alt

Question 11

Offshore banking can take place at which institution?

Accepted Answer

A) agency office only 
B) subsidiary bank only 
C) foreign bank only 
D) subsidiary bank and foreign bank 
E) agency office,subsidiary bank,and foreign bank 
A) agency office only 
B) subsidiary bank only 
C) foreign bank only 
D) subsidiary bank and foreign bank 
E) agency office,subsidiary bank,and foreign bank

Question 12

U.S.reserve requirements

Accepted Answer

A) are rejected by half the banks operating in the United States. 
B) show how regulatory asymmetries can operate to enhance the profitability of Eurocurrency trading. 
C) tend to harm the bank's business and decrease monetary aggregates. 
D) force banks to hold a portion of its assets in a liquid form easily mobilized to meet sudden deposit outflows. 
E) remain in place,but capital requirements have begin defaulting. 
A) are rejected by half the banks operating in the United States. 
B) show how regulatory asymmetries can operate to enhance the profitability of Eurocurrency trading. 
C) tend to harm the bank's business and decrease monetary aggregates. 
D) force banks to hold a portion of its assets in a liquid form easily mobilized to meet sudden deposit outflows. 
E) remain in place,but capital requirements have begin defaulting.

Question 13

For most practical matters,economists assume that

Accepted Answer

A) individuals are risk neutral. 
B) individuals are risk lovers. 
C) individuals are risk averse. 
D) most individuals are risk lovers. 
E) most individuals are risk neutral. 
A) individuals are risk neutral. 
B) individuals are risk lovers. 
C) individuals are risk averse. 
D) most individuals are risk lovers. 
E) most individuals are risk neutral.

Question 14

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 15

Describe three types of gains from trades?

Accepted Answer

A) trades of exchange rates for goods or services,trades of goods or services for property,and trades of gold for textiles 
B) trades of goods or services for goods or services,trades of goods or services for assets,and trades of assets for assets 
C) trades of imports for exports,trades of exports for imports,and trades of natural resources for financial assets 
D) trades of services for goods,trades of currency for services,and trades of one type of currency for another 
E) trades of current goods for future services,trades of currency for gold,and trades of one type of currency for another 
A) trades of exchange rates for goods or services,trades of goods or services for property,and trades of gold for textiles 
B) trades of goods or services for goods or services,trades of goods or services for assets,and trades of assets for assets 
C) trades of imports for exports,trades of exports for imports,and trades of natural resources for financial assets 
D) trades of services for goods,trades of currency for services,and trades of one type of currency for another 
E) trades of current goods for future services,trades of currency for gold,and trades of one type of currency for another

Question 16

Who is the Basel Committee? Discuss both their involvement in the Concordat as well the role of the Concordat in international banking.

Accepted Answer

In 1975,the Basel Committee reached an a

Question 17

In the Interest Parity Condition,Rt - R   t = (   - Et)/Et + xt,where Rt - R   t is the interest rate differential and (   - Et)/Et is the expected change in the exchange rate,what does xt stand for if it potentially is a market efficient difference between the two?

Accepted Answer

A) market inefficiency 
B) risk premium 
C) forecast error 
D) tracking error 
E) excessive volatility 
A) market inefficiency 
B) risk premium 
C) forecast error 
D) tracking error 
E) excessive volatility

Question 18

For the following question,assume the following facts: (1)Chase (which is located in the United States)has a 20% reserve requirement imposed by the government.
(2)Bank of Germany has no reserve requirements.
(3)Both banks may invest at an 8% interest rate.
(4)Both banks have fixed costs of $3 per deposit made.
What is the difference between the minimum interest rates each bank can offer and still make a profit if the deposit is $500 for 1 year?

Accepted Answer

A) 0 - Both banks can offer the same rate. 
B) 1% 
C) 1.6% 
D) 0.4% 
E) 20% 
A) 0 - Both banks can offer the same rate. 
B) 1% 
C) 1.6% 
D) 0.4% 
E) 20%

Question 19

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 20

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

Exam 20: Financial Globalization: Opportunity and Crisis

After Bretton Woods period,countries chose to control

Eurobanks are

If a country chooses to have a monetary policy oriented toward domestic goals and a fixed exchange rate,then

"It is in the interest of each depositor to withdraw her money from a bank if all other depositors are doing the same,even when the bank's assets are sound." Discuss.As part of your answer clearly state whether the statement is true or false.

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

Under a gold standard,countries control

Banks in the U.S.

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

Suppose one is offered a gamble in which you win $1,000 half the time but lose $1,000 half the time.Since in this case one is as likely to win as to lose the $1,000,the average payoff on this gamble-its expected value-is: 0.5 ∗ $1,000 + 0.5 ∗ (-$1,000)= 0. Under such circumstances:

Explain why the FDIC is following a "too-big-to-fail" policy of fully protecting all depositors at the largest banks.

Offshore banking can take place at which institution?

U.S.reserve requirements

For most practical matters,economists assume that

What caused a major economic shock in August 2007?

Describe three types of gains from trades?

Who is the Basel Committee? Discuss both their involvement in the Concordat as well the role of the Concordat in international banking.

In the Interest Parity Condition,Rt - R t = ( - Et)/Et + xt,where Rt - R t is the interest rate differential and ( - Et)/Et is the expected change in the exchange rate,what does xt stand for if it potentially is a market efficient difference between the two?

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?

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

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

In the Interest Parity Condition,R_t - R _t = ( - E_t)/E_t + x_t,where R_t - R _t is the interest rate differential and ( - E_t)/E_t is the expected change in the exchange rate,what does x_t stand for if it potentially is a market efficient difference between the two?

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