Question 1

Under a gold standard, if Britain exported more to France than France exported to Great Britain,

Accepted Answer

A) such international imbalances of payment will be corrected automatically. 
B) this type of imbalance will not be able to persist indefinitely. 
C) net export from Britain will be accompanied by a net flow of gold in the opposite direction. 
D) all of the above 
A) such international imbalances of payment will be corrected automatically. 
B) this type of imbalance will not be able to persist indefinitely. 
C) net export from Britain will be accompanied by a net flow of gold in the opposite direction. 
D) all of the above

Question 2

Corporations today are operating in an environment in which exchange rate changes may adversely affect their competitive positions in the marketplace. This situation, in turn, makes it necessary for many firms to

Accepted Answer

A) carefully manage their exchange risk exposure. 
B) carefully measure their exchange risk exposure. 
C) both a and b 
A) carefully manage their exchange risk exposure. 
B) carefully measure their exchange risk exposure. 
C) both a and b

Question 3

Gresham's Law states that

Accepted Answer

A) bad money drives good money out of circulation. 
B) good money drives bad money out of circulation. 
C) if a country bases its currency on both gold and silver, at an official exchange rate, it will be the more valuable of the two metals that circulate. 
D) none of the above. 
A) bad money drives good money out of circulation. 
B) good money drives bad money out of circulation. 
C) if a country bases its currency on both gold and silver, at an official exchange rate, it will be the more valuable of the two metals that circulate. 
D) none of the above.

Question 4

Following the demise of the Bretton Woods system, the IMF

Accepted Answer

A) created a new role for itself, providing loans to countries facing balance-of-payments and exchange rate difficulties. 
B) ceased to exists, since the era of fixed exchange rates had ended. 
C) became the sole agent responsible for maintaining fixed exchange rates. 
D) became the central bank of the United Nations. 
A) created a new role for itself, providing loans to countries facing balance-of-payments and exchange rate difficulties. 
B) ceased to exists, since the era of fixed exchange rates had ended. 
C) became the sole agent responsible for maintaining fixed exchange rates. 
D) became the central bank of the United Nations.

Question 5

During the period between World War I and World War II, many central banks followed a policy of sterilization of gold

Accepted Answer

A) by restricting the rate of growth in the supply of gold. 
B) by matching inflows and outflows of gold respectively with reductions and increases in domestic money and credit. 
C) by matching inflows and outflows of gold respectively with increases and reductions in domestic money and credit. 
D) none of the above. 
A) by restricting the rate of growth in the supply of gold. 
B) by matching inflows and outflows of gold respectively with reductions and increases in domestic money and credit. 
C) by matching inflows and outflows of gold respectively with increases and reductions in domestic money and credit. 
D) none of the above.

Question 6

In the United States, bimetallism was adopted by the Coinage Act of 1792 and remained a legal standard until 1873,

Accepted Answer

A) when Congress dropped the silver dollar from the list of coins to be minted. 
B) when Congress dropped the twenty-dollar gold piece from the list of coins to be minted. 
C) when gold from the California gold rush drove silver out of circulation. 
D) when gold from the California gold rush drove gold out of circulation. 
A) when Congress dropped the silver dollar from the list of coins to be minted. 
B) when Congress dropped the twenty-dollar gold piece from the list of coins to be minted. 
C) when gold from the California gold rush drove silver out of circulation. 
D) when gold from the California gold rush drove gold out of circulation.

Question 7

One potential drawback of the gold standard is that

Accepted Answer

A) the world economy can be subject to deflationary pressure due to the limited supply of monetary gold. 
B) the world economy can be subject to inflationary pressure without changes in the supply of monetary gold. 
C) gold is scarce. 
D) all of the above 
A) the world economy can be subject to deflationary pressure due to the limited supply of monetary gold. 
B) the world economy can be subject to inflationary pressure without changes in the supply of monetary gold. 
C) gold is scarce. 
D) all of the above

Question 8

Special Drawing Rights (SDR) are

Accepted Answer

A) an artificial international reserve allotted to the members of the International Monetary Fund (IMF), who can then use it for transactions among themselves or with the IMF. 
B) a "portfolio" of currencies, and its value tends to be more stable than the currencies that it is comprised of. 
C) used in addition to gold and foreign exchanges, to make international payments. 
D) all of the above 
A) an artificial international reserve allotted to the members of the International Monetary Fund (IMF), who can then use it for transactions among themselves or with the IMF. 
B) a "portfolio" of currencies, and its value tends to be more stable than the currencies that it is comprised of. 
C) used in addition to gold and foreign exchanges, to make international payments. 
D) all of the above

Question 9

Which country is NOT using the euro?

Accepted Answer

A) Greece 
B) Italy 
C) Sweden 
D) Portugal 
A) Greece 
B) Italy 
C) Sweden 
D) Portugal

Question 10

The advent of the euro marks the first time that sovereign countries have voluntarily given up their

Accepted Answer

A) national borders to foster economic integration. 
B) monetary independence to foster economic integration. 
C) fiscal policy independence to foster economic integration. 
D) national debt to foster economic integration. 
A) national borders to foster economic integration. 
B) monetary independence to foster economic integration. 
C) fiscal policy independence to foster economic integration. 
D) national debt to foster economic integration.

Question 11

A central bank can fix an exchange rate

Accepted Answer

A) in perpetuity. 
B) only for as long as the market believes that it has the political will to do so. 
C) only for as long as it has reserves of gold. 
D) only for as long as it has independence of monetary policy. 
A) in perpetuity. 
B) only for as long as the market believes that it has the political will to do so. 
C) only for as long as it has reserves of gold. 
D) only for as long as it has independence of monetary policy.

Question 12

The Maastricht Treaty

Accepted Answer

A) irrevocably fixed exchange rates among the member currencies. 
B) commits the members of the European Union to political union as well as monetary union. 
C) was signed and subsequently ratified by the 12 member states. 
D) all of the above 
A) irrevocably fixed exchange rates among the member currencies. 
B) commits the members of the European Union to political union as well as monetary union. 
C) was signed and subsequently ratified by the 12 member states. 
D) all of the above

Question 13

In the 1850s the French franc was valued by both gold and silver, under the official French ratio which equated a gold franc to a silver franc 15½ times as heavy. At the same time, the gold from newly discovered mines in California poured into the market, depressing the value of gold. As a result,

Accepted Answer

A) the franc effectively became a silver currency. 
B) the franc effectively became a gold currency. 
C) silver became overvalued under the French official ratio. 
D) answers a and c are correct 
A) the franc effectively became a silver currency. 
B) the franc effectively became a gold currency. 
C) silver became overvalued under the French official ratio. 
D) answers a and c are correct

Question 14

A currency board arrangement is

Accepted Answer

A) when the currency of another country circulates as the sole legal tender. 
B) when the country belongs to a monetary or currency union in which the same legal tender is shared by the members of the union. 
C) a monetary regime based on an explicit legislative commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate, combined with restrictions on the issuing authority to ensure the fulfillment of its legal obligation. 
D) where the country pegs its currency at a fixed rate to a major currency where the exchange rate fluctuates within a narrow margin of less than one percent. 
A) when the currency of another country circulates as the sole legal tender. 
B) when the country belongs to a monetary or currency union in which the same legal tender is shared by the members of the union. 
C) a monetary regime based on an explicit legislative commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate, combined with restrictions on the issuing authority to ensure the fulfillment of its legal obligation. 
D) where the country pegs its currency at a fixed rate to a major currency where the exchange rate fluctuates within a narrow margin of less than one percent.

Question 15

The G-7 is composed of

Accepted Answer

A) Canada, France, Japan, Germany, Italy, the U.K., and the United States. 
B) Switzerland, France, Japan, Germany, Italy, the U.K., and the United States. 
C) Switzerland, France, North Korea, Germany, Italy, the U.K., and the United States. 
D) Switzerland, France, Japan, Germany, Canada, the U.K., and the United States. 
A) Canada, France, Japan, Germany, Italy, the U.K., and the United States. 
B) Switzerland, France, Japan, Germany, Italy, the U.K., and the United States. 
C) Switzerland, France, North Korea, Germany, Italy, the U.K., and the United States. 
D) Switzerland, France, Japan, Germany, Canada, the U.K., and the United States.

Question 16

The Bretton Woods agreement resulted in the creation of

Accepted Answer

A) the bancor as an international reserve asset. 
B) the World Bank. 
C) the Eximbank. 
D) the Federal Reserve Bank. 
A) the bancor as an international reserve asset. 
B) the World Bank. 
C) the Eximbank. 
D) the Federal Reserve Bank.

Question 17

Assume that a country is on the gold standard. In order to support unrestricted convertibility into gold, banknotes need to be backed by a gold reserve of some minimum stated ratio. In addition,

Accepted Answer

A) the domestic money stock should rise and fall as gold flows in and out of the country. 
B) the central bank can control the money supply by buying or selling the foreign currencies. 
C) Both a and b 
A) the domestic money stock should rise and fall as gold flows in and out of the country. 
B) the central bank can control the money supply by buying or selling the foreign currencies. 
C) Both a and b

Question 18

The European Monetary System (EMS) has the chief objective(s)

Accepted Answer

A) to establish a "zone of monetary stability" in Europe. 
B) to coordinate exchange rate policies vis-à-vis the non-EMS currencies. 
C) to pave the way for the eventual European monetary union. 
D) all of the above 
A) to establish a "zone of monetary stability" in Europe. 
B) to coordinate exchange rate policies vis-à-vis the non-EMS currencies. 
C) to pave the way for the eventual European monetary union. 
D) all of the above

Question 19

Suppose that Britain pegs the pound to gold at the market price of £6 per ounce, and the United States pegs the dollar to gold at the market price of $36 per ounce. If the official exchange rate between pounds and U.S. dollars is $5 = £1. Which of the following trades is profitable?

Accepted Answer

A) Start with £100 and trade for $500 at the official exchange rate. Redeem the $500 for 13.89 ounces of gold. Trade the gold for £83.33. 
B) Start with $100 and buy gold. Sell the gold for £16.67. Sell the pounds at the official exchange rate. 
C) Start with £100 and buy gold. Sell the gold for $600. 
D) Start with $500 and trade for £100 at the official exchange rate. Redeem the £100 for 16 2/3 ounces of gold. Trade the gold for $600. 
A) Start with £100 and trade for $500 at the official exchange rate. Redeem the $500 for 13.89 ounces of gold. Trade the gold for £83.33. 
B) Start with $100 and buy gold. Sell the gold for £16.67. Sell the pounds at the official exchange rate. 
C) Start with £100 and buy gold. Sell the gold for $600. 
D) Start with $500 and trade for £100 at the official exchange rate. Redeem the £100 for 16 2/3 ounces of gold. Trade the gold for $600.

Question 20

The Exchange Rate Mechanism (ERM) is

Accepted Answer

A) the procedure by which ERM member countries collectively manage their exchange rates. 
B) based on a "parity-grid" system, which is a system of par values among ERM countries. 
C) a and b 
D) none of the above 
A) the procedure by which ERM member countries collectively manage their exchange rates. 
B) based on a "parity-grid" system, which is a system of par values among ERM countries. 
C) a and b 
D) none of the above

Exam 2: International Monetary System

Under a gold standard, if Britain exported more to France than France exported to Great Britain,

Corporations today are operating in an environment in which exchange rate changes may adversely affect their competitive positions in the marketplace. This situation, in turn, makes it necessary for many firms to

Gresham's Law states that

Following the demise of the Bretton Woods system, the IMF

During the period between World War I and World War II, many central banks followed a policy of sterilization of gold

In the United States, bimetallism was adopted by the Coinage Act of 1792 and remained a legal standard until 1873,

One potential drawback of the gold standard is that

Special Drawing Rights (SDR) are

Which country is NOT using the euro?

The advent of the euro marks the first time that sovereign countries have voluntarily given up their

A central bank can fix an exchange rate

The Maastricht Treaty

In the 1850s the French franc was valued by both gold and silver, under the official French ratio which equated a gold franc to a silver franc 15½ times as heavy. At the same time, the gold from newly discovered mines in California poured into the market, depressing the value of gold. As a result,

A currency board arrangement is

The G-7 is composed of

The Bretton Woods agreement resulted in the creation of

Assume that a country is on the gold standard. In order to support unrestricted convertibility into gold, banknotes need to be backed by a gold reserve of some minimum stated ratio. In addition,

The European Monetary System (EMS) has the chief objective(s)

Suppose that Britain pegs the pound to gold at the market price of £6 per ounce, and the United States pegs the dollar to gold at the market price of $36 per ounce. If the official exchange rate between pounds and U.S. dollars is $5 = £1. Which of the following trades is profitable?

The Exchange Rate Mechanism (ERM) is

Globalization and the Multinational Firm

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

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