Question 1

Eurodollars are

Accepted Answer

A)  dollar deposits located in the United States. 
B)  dollar deposits located in Europe. 
C)  dollar deposits located outside Europe. 
D)  dollar deposits located outside the United States. 
E)  dollar deposits located outside both Europe and the United States. 
A)  dollar deposits located in the United States. 
B)  dollar deposits located in Europe. 
C)  dollar deposits located outside Europe. 
D)  dollar deposits located outside the United States. 
E)  dollar deposits located outside both Europe and the United States.

Question 2

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 3

Risk averse people

Accepted Answer

A)  will never hold bonds denominated in several different currencies because of transaction costs. 
B)  will always hold bonds denominated in several different currencies because of transaction costs. 
C)  may hold bonds denominated in several different currencies. 
D)  may hold bonds denominated in several different currencies only if satisfying the well known interest party condition. 
E)  will hold only domestic bonds because of the home bias effect. 
A)  will never hold bonds denominated in several different currencies because of transaction costs. 
B)  will always hold bonds denominated in several different currencies because of transaction costs. 
C)  may hold bonds denominated in several different currencies. 
D)  may hold bonds denominated in several different currencies only if satisfying the well known interest party condition. 
E)  will hold only domestic bonds because of the home bias effect.

Question 4

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

Accepted Answer

Risk aversion is a characteris

Question 5

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

Accepted Answer

A)  The Federal Deposit Insurance Corporation (FDI
C)  insures bank deposits against losses up to $250,000. 
B)  The Federal Deposit Insurance Corporation (FDI
C)  insures bank deposits against losses up to $100,000. 
C)  The Federal Deposit Insurance Corporation (FDI
C)  insures bank deposits against losses up to $10,000. 
D)  The Federal Deposit Insurance Corporation (FDI
C)  insures bank deposits against natural disaster up to $100,000. 
E)  The Federal Deposit Insurance Corporation (FDI
C)  insures bank deposits against floods up to $100,000. 
A)  The Federal Deposit Insurance Corporation (FDI
C)  insures bank deposits against losses up to $250,000. 
B)  The Federal Deposit Insurance Corporation (FDI
C)  insures bank deposits against losses up to $100,000. 
C)  The Federal Deposit Insurance Corporation (FDI
C)  insures bank deposits against losses up to $10,000. 
D)  The Federal Deposit Insurance Corporation (FDI
C)  insures bank deposits against natural disaster up to $100,000. 
E)  The Federal Deposit Insurance Corporation (FDI
C)  insures bank deposits against floods up to $100,000.

Question 6

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 7

Calculate the average, for each country of kiwi harvest.

Accepted Answer

The average for each country of kiwi har

Question 8

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 9

Under the unified Euro regime, the European countries control

Accepted Answer

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

Question 10

Complete the following table.

Accepted Answer

The answer of Complete the following table.  ...

Question 11

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 12

Large differences in interest rates between countries would indicate that:

Accepted Answer

A)  the global market is thriving. 
B)  there is good communication between countries about potential global investment opportunities. 
C)  there are unrealized gains from trade. 
D)  the market is in danger of collapse. 
E)  the supply growth exceeds the aggregate demand. 
A)  the global market is thriving. 
B)  there is good communication between countries about potential global investment opportunities. 
C)  there are unrealized gains from trade. 
D)  the market is in danger of collapse. 
E)  the supply growth exceeds the aggregate demand.

Question 13

For the following questions 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 reserve at the Fed?

Accepted Answer

A)  Fact 2 is a decrease of $150,000, fact 5 is a decrease of $150,000, a net effect of -$300,000. 
B)  Fact 3 is a decrease of $150,000, fact 5 is an increase of $150,000, a net effect of 0. 
C)  Fact 3 is an increase of $150,000, fact 5 is a decrease of $150,000, a net effect of 0. 
D)  Both fact 3 and fact 5 result in increases of $150,000, a net effect of +$300,000. 
E)  Both fact 3 and fact 5 result in decrease of $150,000, a net effect of -$300,000. 
A)  Fact 2 is a decrease of $150,000, fact 5 is a decrease of $150,000, a net effect of -$300,000. 
B)  Fact 3 is a decrease of $150,000, fact 5 is an increase of $150,000, a net effect of 0. 
C)  Fact 3 is an increase of $150,000, fact 5 is a decrease of $150,000, a net effect of 0. 
D)  Both fact 3 and fact 5 result in increases of $150,000, a net effect of +$300,000. 
E)  Both fact 3 and fact 5 result in decrease of $150,000, a net effect of -$300,000.

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

A business's use of a bank located outside of the home country is called:

Accepted Answer

A)  Swiss banking. 
B)  offshore banking. 
C)  international banking. 
D)  domestic banking. 
E)  international swapping. 
A)  Swiss banking. 
B)  offshore banking. 
C)  international banking. 
D)  domestic banking. 
E)  international swapping.

Question 16

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 17

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.

Question 18

The fact that assets of the political opponents of the U.S. were frozen in U.S. banks

Accepted Answer

A)  was challenged as unconstitutional. 
B)  lead to an increased amount of funds being placed in Eurobanks. 
C)  lead to a violation of the Law of One Price. 
D)  lead to the Cold War. 
E)  lead to a violation of Regulation Q. 
A)  was challenged as unconstitutional. 
B)  lead to an increased amount of funds being placed in Eurobanks. 
C)  lead to a violation of the Law of One Price. 
D)  lead to the Cold War. 
E)  lead to a violation of Regulation Q.

Question 19

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

Question 20

Banks in the U.S.

Accepted Answer

A)  are prevented from holding assets that are "too risky." 
B)  are not prevented from holding assets that are "too risky." 
C)  are encouraged not to hold assets that are "too risky." 
D)  are not encouraged not to hold assets that are "too risky." 
E)  are encouraged to lend to a single private customer. 
A)  are prevented from holding assets that are "too risky." 
B)  are not prevented from holding assets that are "too risky." 
C)  are encouraged not to hold assets that are "too risky." 
D)  are not encouraged not to hold assets that are "too risky." 
E)  are encouraged to lend to a single private customer.

Exam 21: Financial Globalization: Opportunity and Crisis

Eurodollars are

Which of the following is true about exchange rates?

Risk averse people

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

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

The scale of transactions in the international capital market has

Calculate the average, for each country of kiwi harvest.

Offshore banking can take place at which institution?

Under the unified Euro regime, the European countries control

Complete the following table.

Equity Instruments include

Large differences in interest rates between countries would indicate that:

What caused a major economic shock in August 2007?

A business's use of a bank located outside of the home country is called:

Which statement is not true regarding emerging markets?

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

The fact that assets of the political opponents of the U.S. were frozen in U.S. banks

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

Banks in the U.S.

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 European Experience

Developing Countries: Growth, Crisis, and Reform

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