Question 1

Capital markets of poor developing countries that liberalized their financial systems to allow private asset trade with foreigners are called

Accepted Answer

A) direct foreign markets. 
B) foreign exchange markets. 
C) stock & bond markets. 
D) emerging markets. 
E) fledgling financial markets. 
A) direct foreign markets. 
B) foreign exchange markets. 
C) stock & bond markets. 
D) emerging markets. 
E) fledgling financial markets.

Question 2

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 3

Explain the issues involved with the Fed acting as a lender of Last Resort (LLR).

Accepted Answer

On the one hand,LLR enables th

Question 4

Many observers believe that the largely unregulated nature of global banking activity leaves the world financial system vulnerable to bank failure on a massive scale.Is this a real threat? If so,what measures have governments taken to reduce it?

Accepted Answer

Yes,this is a real threat.A high level o

Question 5

Describe the extensive "safety net" that has been set up in the United States in order to reduce the risk of bank failure.

Accepted Answer

(1)Deposit insurance
(2)Reserv

Question 6

Does the interest rate parity hold in each of the following cases by using the formula
Rt - Rt
 
   = (Ee+1 - Et)/Et
 
   ? In case it does not hold,calculate the risk premium.
1.Rt = 5,   = 3,Et = 5,   = 17
2.Rt = 6,   = 4,Et = 5,   = 5
3.Rt = 7,   = 5,Et = 5,   = 8
4.Rt = 8,   = 3,Et = 5,   = 15
5.Rt = 5,   = 4,Et = 6,   = 6
6.Rt = 5,   = 5,Et = 3,   = 10
7.Rt = 5,   = 6,Et = 2,   = 8
8.Rt = 5,   = 3,Et = 0,   = 20
9.Rt = 5,   = 9,Et = 7,   = 3
10.Rt = 5,   = 10,Et = 8,   = 7

Accepted Answer

Question 7

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 8

Asset trades that deal with equity instruments are best described as

Accepted Answer

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

Question 9

Rising inflationary pressure caused the U.S.to tighten its monetary policy at the end of the 1960s.As a result,market interest rates rose above the Regulation Q ceiling and American banks found it impossible to attract time deposits for re-lending.How did the banks get around this problem?

Accepted Answer

A) by setting their own interest rates and then using better business as compensation for government regulations 
B) by borrowing funds from European branches,which faced no restriction on the interest they could pay on Eurodollar deposits 
C) by pushing through new legislation that nullified Regulation Q 
D) by creating subsidiary branches in foreign countries 
E) by waiting to trade time deposits until Regulation Q no longer applied 
A) by setting their own interest rates and then using better business as compensation for government regulations 
B) by borrowing funds from European branches,which faced no restriction on the interest they could pay on Eurodollar deposits 
C) by pushing through new legislation that nullified Regulation Q 
D) by creating subsidiary branches in foreign countries 
E) by waiting to trade time deposits until Regulation Q no longer applied

Question 10

Calculate the expected payoff for the following cases,where q1 and q2 are the probabilities of state 1 and 2,respectively.

Accepted Answer

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

Question 11

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

Accepted Answer

Risk aversion is a characteris

Question 12

If a country chooses to have a monetary policy oriented toward domestic goals and the freedom of international capital movements,then

Accepted Answer

A) it can have a fixed exchange rate. 
B) it cannot have a fixed exchange rate. 
C) it cannot balance its current account. 
D) it cannot have a fiscal policy oriented toward domestic goals. 
E) it cannot control money supply growth. 
A) it can have a fixed exchange rate. 
B) it cannot have a fixed exchange rate. 
C) it cannot balance its current account. 
D) it cannot have a fiscal policy oriented toward domestic goals. 
E) it cannot control money supply growth.

Question 13

How well has the international capital market perform?

Accepted Answer

International portfo

Question 14

What is a difficulty encountered in regulating international banking?

Accepted Answer

A) excessive deposit insurance rates on international banks 
B) absence of reserve requirements 
C) oppressive regulatory controls that reduce competitiveness 
D) lack of funds and incentive to secure payments 
E) variability in exchange rates 
A) excessive deposit insurance rates on international banks 
B) absence of reserve requirements 
C) oppressive regulatory controls that reduce competitiveness 
D) lack of funds and incentive to secure payments 
E) variability in exchange rates

Question 15

Which of the following is TRUE about exchange rates?

Accepted Answer

A) They should not be volatile because they will determine the economic climate. 
B) They are generally more volatile than stock prices. 
C) They are more volatile than several underlying factors that move them such as money supplies and fiscal variables. 
D) They should be volatile because to correct price signals they adjust quickly in response to economic news,but they are generally less volatile than stock prices. 
E) They never overreact to economic news. 
A) They should not be volatile because they will determine the economic climate. 
B) They are generally more volatile than stock prices. 
C) They are more volatile than several underlying factors that move them such as money supplies and fiscal variables. 
D) They should be volatile because to correct price signals they adjust quickly in response to economic news,but they are generally less volatile than stock prices. 
E) They never overreact to economic news.

Question 16

What are the three types of transactions between the residents of different countries?

Accepted Answer

The three types are:
(1)Trades

Question 17

In the U.S. ,the following agencies have the right to examine the bank's books

Accepted Answer

A) Fed and the FDIC. 
B) FDIC and the Office of the Comptroller of the Currency. 
C) Fed and the Department of Commerce 
D) FDIC,Fed and the Office of the Comptroller of the Currency. 
E) Only the Fed. 
A) Fed and the FDIC. 
B) FDIC and the Office of the Comptroller of the Currency. 
C) Fed and the Department of Commerce 
D) FDIC,Fed and the Office of the Comptroller of the Currency. 
E) Only the Fed.

Question 18

Investment banks in the U.S.are

Accepted Answer

A) regular banks specializing in investment projects. 
B) not banks at all but institutions which specialize in underwriting sales of stocks and bonds. 
C) special arm of the U.S.government for U.S.banks operating outside the U.S. 
D) regular banks specializing in investment projects,but allowed to offer limited domestic transactions. 
E) international banks that are heavily invest in the U.S. 
A) regular banks specializing in investment projects. 
B) not banks at all but institutions which specialize in underwriting sales of stocks and bonds. 
C) special arm of the U.S.government for U.S.banks operating outside the U.S. 
D) regular banks specializing in investment projects,but allowed to offer limited domestic transactions. 
E) international banks that are heavily invest in the U.S.

Question 19

The scale of transactions in the international capital market has

Accepted Answer

A) grown more quickly than world GDP since the early 1970s. 
B) grown less quickly than world GDP since the early 1970s. 
C) grown about the same rate as the world GDP since the early 1970s. 
D) been fixed by international regulations. 
E) decreased more quickly than world GDP since the early 1970s. 
A) grown more quickly than world GDP since the early 1970s. 
B) grown less quickly than world GDP since the early 1970s. 
C) grown about the same rate as the world GDP since the early 1970s. 
D) been fixed by international regulations. 
E) decreased more quickly than world GDP since the early 1970s.

Question 20

Statistical studies of the relationship between interest rates and later depreciation rates show that

Accepted Answer

A) the interest difference has been a very bad predictor in the large swings of exchange rates. 
B) the interest difference has been an accurate predictor in the large swings of exchange rates. 
C) the interest difference has correctly predicted the direction in which exchange rates would change. 
D) the interest difference has not yet been studied as a predictor in the large swings of exchange rates. 
E) the interest difference is unrelated to the large swings of exchange rates. 
A) the interest difference has been a very bad predictor in the large swings of exchange rates. 
B) the interest difference has been an accurate predictor in the large swings of exchange rates. 
C) the interest difference has correctly predicted the direction in which exchange rates would change. 
D) the interest difference has not yet been studied as a predictor in the large swings of exchange rates. 
E) the interest difference is unrelated to the large swings of exchange rates.

Exam 20: Financial Globalization: Opportunity and Crisis

Capital markets of poor developing countries that liberalized their financial systems to allow private asset trade with foreigners are called

What structures make up the international capital markets?

Explain the issues involved with the Fed acting as a lender of Last Resort (LLR).

Many observers believe that the largely unregulated nature of global banking activity leaves the world financial system vulnerable to bank failure on a massive scale.Is this a real threat? If so,what measures have governments taken to reduce it?

Describe the extensive "safety net" that has been set up in the United States in order to reduce the risk of bank failure.

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

Asset trades that deal with equity instruments are best described as

Rising inflationary pressure caused the U.S.to tighten its monetary policy at the end of the 1960s.As a result,market interest rates rose above the Regulation Q ceiling and American banks found it impossible to attract time deposits for re-lending.How did the banks get around this problem?

Calculate the expected payoff for the following cases,where q1 and q2 are the probabilities of state 1 and 2,respectively.

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

If a country chooses to have a monetary policy oriented toward domestic goals and the freedom of international capital movements,then

How well has the international capital market perform?

What is a difficulty encountered in regulating international banking?

Which of the following is TRUE about exchange rates?

What are the three types of transactions between the residents of different countries?

In the U.S. ,the following agencies have the right to examine the bank's books

Investment banks in the U.S.are

The scale of transactions in the international capital market has

Statistical studies of the relationship between interest rates and later depreciation rates show that

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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