Question 1

Which EU country has NOT adopted the euro?

Accepted Answer

A)  Germany 
B)  France 
C)  Sweden 
D)  Greece 
A)  Germany 
B)  France 
C)  Sweden 
D)  Greece

Question 2

Which of the following countries has a soft peg currency?

Accepted Answer

A)  China 
B)  Brazil 
C)  Japan 
D)  India 
A)  China 
B)  Brazil 
C)  Japan 
D)  India

Question 3

Which of the following accurately explains how producers are affected by exchange rate changes?

Accepted Answer

A)  To save money, a manufacturer may decide to relocate production to a country with a stronger currency. 
B)  A manufacturing firm relocating to a country with a weak currency can make a cheap initial investment. 
C)  Goods manufactured in a country with a weak currency may be relatively expensive in world markets. 
D)  A manufacturer with high operating expenses would likely relocate production to a country with a currency that is gaining value. 
A)  To save money, a manufacturer may decide to relocate production to a country with a stronger currency. 
B)  A manufacturing firm relocating to a country with a weak currency can make a cheap initial investment. 
C)  Goods manufactured in a country with a weak currency may be relatively expensive in world markets. 
D)  A manufacturer with high operating expenses would likely relocate production to a country with a currency that is gaining value.

Question 4

When forecasting exchange rates,forecasters must predict the magnitude,timing,and direction of change in exchange rates.

Accepted Answer

A) True 
 B)False

Question 5

Inflation in the United States would cause China's massive dollar reserves to lose value.

Accepted Answer

A) True 
 B)False

Question 6

Given the daily volume of foreign-exchange transactions,it is most accurate to say which of the following?

Accepted Answer

A)  It is impossible for a government's interventions in the foreign-exchange market to affect market psychology. 
B)  A government's intervention in the foreign-exchange market can reverse a currency's slide for the long term. 
C)  A government's intervention cannot force the foreign-exchange market to move in a determined direction. 
D)  A government should focus more on intervening in foreign-exchange markets than on correcting economic fundamentals. 
A)  It is impossible for a government's interventions in the foreign-exchange market to affect market psychology. 
B)  A government's intervention in the foreign-exchange market can reverse a currency's slide for the long term. 
C)  A government's intervention cannot force the foreign-exchange market to move in a determined direction. 
D)  A government should focus more on intervening in foreign-exchange markets than on correcting economic fundamentals.

Question 7

The International Fisher Effect implies that ________.

Accepted Answer

A)  the country with the higher interest rate should have lower inflation 
B)  the currency of the country with the lower interest rate will strengthen in the future 
C)  the currency of the country with the higher interest rate will strengthen in the future 
D)  interest rates and inflation are not linked at all 
A)  the country with the higher interest rate should have lower inflation 
B)  the currency of the country with the lower interest rate will strengthen in the future 
C)  the currency of the country with the higher interest rate will strengthen in the future 
D)  interest rates and inflation are not linked at all

Question 8

What is a Special Drawing Right (SDR)? How is it used?

Accepted Answer

To help increase international reserves,

Question 9

Which of the following most accurately describes the economic situation in El Salvador?

Accepted Answer

A)  It is facing significant competition from neighboring countries that are not tied to the dollar. 
B)  It relies exclusively on the United States as a market for its products. 
C)  It now has the same exchange rate as other members of CACM. 
D)  It is putting more resources into industries that have a history of earning profits. 
A)  It is facing significant competition from neighboring countries that are not tied to the dollar. 
B)  It relies exclusively on the United States as a market for its products. 
C)  It now has the same exchange rate as other members of CACM. 
D)  It is putting more resources into industries that have a history of earning profits.

Question 10

Why is China most likely considering a greater reliance on the SDR?

Accepted Answer

A)  gains in the foreign-exchange market 
B)  concerns about the value of the U.S. dollar 
C)  demands to replace the dollar with the euro for reserves 
D)  requirements by the IMF to make China's currency more flexible 
A)  gains in the foreign-exchange market 
B)  concerns about the value of the U.S. dollar 
C)  demands to replace the dollar with the euro for reserves 
D)  requirements by the IMF to make China's currency more flexible

Question 11

Endaka,the "high yen," caused financial problems for ________.

Accepted Answer

A)  Japanese foreign-exchange reserves 
B)  American foreign-exchange reserves 
C)  Japanese importers 
D)  Japanese exporters 
A)  Japanese foreign-exchange reserves 
B)  American foreign-exchange reserves 
C)  Japanese importers 
D)  Japanese exporters

Question 12

The Fed wants to counter downward pressure on the dollar,so it will most likely ________.

Accepted Answer

A)  sell dollars for foreign currency 
B)  sell dollars and buy foreign stocks 
C)  buy Treasury bills with dollars 
D)  buy dollars with foreign currency 
A)  sell dollars for foreign currency 
B)  sell dollars and buy foreign stocks 
C)  buy Treasury bills with dollars 
D)  buy dollars with foreign currency

Question 13

Many economists have predicted that Hong Kong will change its currency system to the ________.

Accepted Answer

A)  U.S. dollar 
B)  euro 
C)  yuan 
D)  won 
A)  U.S. dollar 
B)  euro 
C)  yuan 
D)  won

Question 14

The IMF uses the quota system to determine how much a country may borrow from the Fund.

Accepted Answer

A) True 
 B)False

Question 15

The purchasing power parity theory claims that a change in relative ________ between two countries must cause a change in ________ in order to keep the prices of goods in two countries fairly similar.

Accepted Answer

A)  exchange rates; inflation 
B)  inflation; exchange rates 
C)  interest rates; inflation 
D)  interest rates; exchange rates 
A)  exchange rates; inflation 
B)  inflation; exchange rates 
C)  interest rates; inflation 
D)  interest rates; exchange rates

Question 16

Which of the following was part of the stability and growth pact that was required for countries to be part of the European Monetary Union?

Accepted Answer

A)  The annual government budget must be no greater than 3% of GDP. 
B)  The annual inflation rate must remain within 1.5% of the three best-performing EU countries. 
C)  The annual government budget deficit could be no greater than 60% of GDP. 
D)  The annual inflation rate must remain within 5.5% of the four best-performing EU countries. 
A)  The annual government budget must be no greater than 3% of GDP. 
B)  The annual inflation rate must remain within 1.5% of the three best-performing EU countries. 
C)  The annual government budget deficit could be no greater than 60% of GDP. 
D)  The annual inflation rate must remain within 5.5% of the four best-performing EU countries.

Question 17

According to the text,which currency is expected to experience the most change in the upcoming years?

Accepted Answer

A)  yen 
B)  yuan 
C)  euro 
D)  U.S. dollar 
A)  yen 
B)  yuan 
C)  euro 
D)  U.S. dollar

Question 18

Shelly,a manager at a global firm,is studying the foreign currency intervention practices of Indonesia.Shelly is most likely examining ________ factors.

Accepted Answer

A)  institutional setting 
B)  fundamental analysis 
C)  confidence 
D)  circumstantial 
A)  institutional setting 
B)  fundamental analysis 
C)  confidence 
D)  circumstantial

Question 19

The major objective of the European Central Bank is to ________.

Accepted Answer

A)  set monetary policy for EU countries that adopt the euro 
B)  ensure that EU interest rates are equal to U.S. rates 
C)  control taxes as a means of monitoring EU debt 
D)  reduce spending by EU countries 
A)  set monetary policy for EU countries that adopt the euro 
B)  ensure that EU interest rates are equal to U.S. rates 
C)  control taxes as a means of monitoring EU debt 
D)  reduce spending by EU countries

Question 20

Which of the following statements best describes a limitation of the Big Mac Index?

Accepted Answer

A)  Profit margins vary by the strength of competition, which affect relative prices. 
B)  The theory of PPP incorrectly assumes that there are barriers to trade. 
C)  The Big Mac represents all possible commodities and services. 
D)  Taxes have no effect on Big Mac prices. 
A)  Profit margins vary by the strength of competition, which affect relative prices. 
B)  The theory of PPP incorrectly assumes that there are barriers to trade. 
C)  The Big Mac represents all possible commodities and services. 
D)  Taxes have no effect on Big Mac prices.

Which EU country has NOT adopted the euro?

Which of the following countries has a soft peg currency?

Which of the following accurately explains how producers are affected by exchange rate changes?

When forecasting exchange rates,forecasters must predict the magnitude,timing,and direction of change in exchange rates.

Inflation in the United States would cause China's massive dollar reserves to lose value.

Given the daily volume of foreign-exchange transactions,it is most accurate to say which of the following?

The International Fisher Effect implies that ________.

What is a Special Drawing Right (SDR)? How is it used?

Which of the following most accurately describes the economic situation in El Salvador?

Why is China most likely considering a greater reliance on the SDR?

Endaka,the "high yen," caused financial problems for ________.

The Fed wants to counter downward pressure on the dollar,so it will most likely ________.

Many economists have predicted that Hong Kong will change its currency system to the ________.

The IMF uses the quota system to determine how much a country may borrow from the Fund.

The purchasing power parity theory claims that a change in relative between two countries must cause a change in in order to keep the prices of goods in two countries fairly similar.

Which of the following was part of the stability and growth pact that was required for countries to be part of the European Monetary Union?

According to the text,which currency is expected to experience the most change in the upcoming years?

Shelly,a manager at a global firm,is studying the foreign currency intervention practices of Indonesia.Shelly is most likely examining ________ factors.

The major objective of the European Central Bank is to ________.

Which of the following statements best describes a limitation of the Big Mac Index?

Globalization and International Business

The Cultural Environments Facing Business

The Political and Legal Environments Facing Business

The Economic Environments Facing Businesses

International Trade and Factor-Mobility Theory

Governmental Influence on Trade

Cross-National Cooperation and Agreements

Global Foreign-Exchange Markets

Global Capital Markets

Globalization and Society

The Strategy of International Business

Country Evaluation and Selection

Export and Import

Direct Investment and Collaborative Strategies

The Organization of International Business

Marketing Globally

Global Manufacturing and Supply-Chain Management

International Accounting and Finance Issues

International Human Resource Management

Filters

Exam 9: The Determination of Exchange Rates

Which EU country has NOT adopted the euro?

Which of the following countries has a soft peg currency?

Which of the following accurately explains how producers are affected by exchange rate changes?

When forecasting exchange rates,forecasters must predict the magnitude,timing,and direction of change in exchange rates.

Inflation in the United States would cause China's massive dollar reserves to lose value.

Given the daily volume of foreign-exchange transactions,it is most accurate to say which of the following?

The International Fisher Effect implies that ________.

What is a Special Drawing Right (SDR)? How is it used?

Which of the following most accurately describes the economic situation in El Salvador?

Why is China most likely considering a greater reliance on the SDR?

Endaka,the "high yen," caused financial problems for ________.

The Fed wants to counter downward pressure on the dollar,so it will most likely ________.

Many economists have predicted that Hong Kong will change its currency system to the ________.

The IMF uses the quota system to determine how much a country may borrow from the Fund.

The purchasing power parity theory claims that a change in relative ________ between two countries must cause a change in ________ in order to keep the prices of goods in two countries fairly similar.

Which of the following was part of the stability and growth pact that was required for countries to be part of the European Monetary Union?

According to the text,which currency is expected to experience the most change in the upcoming years?

Shelly,a manager at a global firm,is studying the foreign currency intervention practices of Indonesia.Shelly is most likely examining ________ factors.

The major objective of the European Central Bank is to ________.

Which of the following statements best describes a limitation of the Big Mac Index?

Globalization and International Business

The Cultural Environments Facing Business

The Political and Legal Environments Facing Business

The Economic Environments Facing Businesses

International Trade and Factor-Mobility Theory

Governmental Influence on Trade

Cross-National Cooperation and Agreements

Global Foreign-Exchange Markets

Global Capital Markets

Globalization and Society

The Strategy of International Business

Country Evaluation and Selection

Export and Import

Direct Investment and Collaborative Strategies

The Organization of International Business

Marketing Globally

Global Manufacturing and Supply-Chain Management

International Accounting and Finance Issues

International Human Resource Management

Filters

The purchasing power parity theory claims that a change in relative between two countries must cause a change in in order to keep the prices of goods in two countries fairly similar.