Question 1

Which type of main institution in the international capital market most often is involved in foreign exchange intervention?

Accepted Answer

A) central banks 
B) non-bank financial institutions 
C) insurance companies 
D) corporations 
E) commercial banks 
A) central banks 
B) non-bank financial institutions 
C) insurance companies 
D) corporations 
E) commercial banks

Question 2

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.

Question 3

Intertemporal trade is

Accepted Answer

A) the exchange of goods but not services for claims to future goods. 
B) the exchange of services but not goods for claims to future services. 
C) the exchange of good and services for claims to future goods and services. 
D) the exchange of domestic goods and services for foreign goods and services. 
E) the type of trade that the U.S.government focuses most upon. 
A) the exchange of goods but not services for claims to future goods. 
B) the exchange of services but not goods for claims to future services. 
C) the exchange of good and services for claims to future goods and services. 
D) the exchange of domestic goods and services for foreign goods and services. 
E) the type of trade that the U.S.government focuses most upon.

Question 4

What is securitization?

Accepted Answer

The term refers to financial instrument

Question 5

For the following question assume the following facts: (1)Balance of Payments = 0 prior to the transactions.
(2)Person A (who lives in the United States)purchases an airplane from British Airways for $150,000.
(3)Person A pays with a check from his account at First Union Bank in the United States.
(4)British airways,since it will need dollars in 1 month,deposits the check at the Bank of England.
(5)Bank of England deposits the $150,000 at Commonwealth bank,which is located in the United States.
Due to the transactions above,what are the effects on the balance of payments?

Accepted Answer

A) -$150,000 due to import of good (current account debit) 
B) +$150,000 due to import of good (current account credit) 
C) -$150,000 due to deposit of Bank of England (capital account debit) 
D) +$150,000 due to deposit of Bank of England (capital account credit) 
E) No effect (150,000 current account debit and 150,000 capital account credit) 
A) -$150,000 due to import of good (current account debit) 
B) +$150,000 due to import of good (current account credit) 
C) -$150,000 due to deposit of Bank of England (capital account debit) 
D) +$150,000 due to deposit of Bank of England (capital account credit) 
E) No effect (150,000 current account debit and 150,000 capital account credit)

Question 6

Which of the following statements is TRUE?

Accepted Answer

A) Bank failures inflict serious financial harm on individual depositors. 
B) Bank failures do not inflict serious financial harm on individual depositors. 
C) Bank failures inflict not only serious financial harm on individual depositors,but also harm the macroeconomic stability of the economy. 
D) Bank failures inflict serious financial harm on individual depositors,but fortunately do not harm the macroeconomic stability of the economy. 
E) Bank failures only inflict serious financial harm on the macroeconomic stability of the economy. 
A) Bank failures inflict serious financial harm on individual depositors. 
B) Bank failures do not inflict serious financial harm on individual depositors. 
C) Bank failures inflict not only serious financial harm on individual depositors,but also harm the macroeconomic stability of the economy. 
D) Bank failures inflict serious financial harm on individual depositors,but fortunately do not harm the macroeconomic stability of the economy. 
E) Bank failures only inflict serious financial harm on the macroeconomic stability of the economy.

Question 7

Complete the following table with the formula (P1)* (payoff if state 1)+ (P2)* (payoff if state 2),where P1 and P2 are the probabilities of state 1 and 2,respectively.

Accepted Answer

The answer of Complete the following table with the formula...

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

Calculate the expected payoff for the following cases with the formula: (P1)* (payoff if state 1)+ (P2)* (payoff if state 2),where P1 and P2 are the probabilities of state 1 and 2,respectively.

Accepted Answer

The answer of Calculate the expected payoff for the following...

Question 10

Equity Instruments include

Accepted Answer

A) stocks. 
B) bonds. 
C) banks deposits. 
D) receipts. 
E) bank statements. 
A) stocks. 
B) bonds. 
C) banks deposits. 
D) receipts. 
E) bank statements.

Question 11

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 12

Asset trades that deal with debt instruments are best described as

Accepted Answer

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

Question 13

Why is portfolio diversification so important in international trade?

Accepted Answer

Portfolio diversification is important i

Question 14

Describe how the Eurodollar market's early growth was spawned by the Cold War between the United States and the U.S.S.R.

Accepted Answer

During the Cold War,the Soviets feared t

Question 15

Explain why large interest rate differences would be strong evidence of unrealized gains from trade.

Accepted Answer

The difference between onshore and offsh

Question 16

In the U.S. ,banks

Accepted Answer

A) may not be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid. 
B) may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid. 
C) may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid only if the Fed and the FDIC examiners agree. 
D) may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid only if the Fed and the Office of the Comptroller of the Currency examiners agree. 
E) may be forced by bank examiner to adjust their balance sheets by paying off loans the examiner thinks will not be repaid. 
A) may not be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid. 
B) may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid. 
C) may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid only if the Fed and the FDIC examiners agree. 
D) may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid only if the Fed and the Office of the Comptroller of the Currency examiners agree. 
E) may be forced by bank examiner to adjust their balance sheets by paying off loans the examiner thinks will not be repaid.

Question 17

What would best describe the international capital markets?

Accepted Answer

A) the market of exchange of bonds 
B) the market of exchange of stocks 
C) the market of exchange of real-estate 
D) the market in which residents of different countries trade assets 
E) the currency market 
A) the market of exchange of bonds 
B) the market of exchange of stocks 
C) the market of exchange of real-estate 
D) the market in which residents of different countries trade assets 
E) the currency market

Question 18

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 19

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 20

"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)No

Exam 20: Financial Globalization: Opportunity and Crisis

Which type of main institution in the international capital market most often is involved in foreign exchange intervention?

The international capital market is:

Intertemporal trade is

What is securitization?

Which of the following statements is TRUE?

Complete the following table with the formula (P1)* (payoff if state 1)+ (P2)* (payoff if state 2),where P1 and P2 are the probabilities of state 1 and 2,respectively.

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

Calculate the expected payoff for the following cases with the formula: (P1)* (payoff if state 1)+ (P2)* (payoff if state 2),where P1 and P2 are the probabilities of state 1 and 2,respectively.

Equity Instruments include

The leading center of Eurocurrency trading is

Asset trades that deal with debt instruments are best described as

Why is portfolio diversification so important in international trade?

Describe how the Eurodollar market's early growth was spawned by the Cold War between the United States and the U.S.S.R.

Explain why large interest rate differences would be strong evidence of unrealized gains from trade.

In the U.S. ,banks

What would best describe the international capital markets?

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

Which statement is NOT true regarding emerging markets?

"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.

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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