Question 1

According to the law of one price,identical goods should sell for the same price in different countries according to the local currencies.

Accepted Answer

A) True 
 B)False

Question 2

Scenario - S & I Creations
Sven and Ingrid Allgertson developed the idea for their thriving business while awaiting the birth of their first child,Olga.Finding nowhere to purchase fine handmade baby clothing and other items,the couple decided to start their own business.Neither Sven nor Ingrid imagined just how successful this endeavor would turn out to be for them.Their designer baby clothes and products were an instant hit in the world marketplace.And even though the baby items are quite expensive to purchase,shoppers from around the world are only too happy to spend large sums of money on their beloved children.
Originally S & I Creations only sold products within Sweden,but soon global demand necessitated the company offer its products in several other foreign markets.Now the proud parents of baby Olga are also the proud owners of a $10 billion per year business.Sven and Ingrid cannot wait to see what the future holds for their family and their business operations.
-Many investors seeking assistance from the Whoppler Firm wish to use the forward market to lock in future exchange rates and ensure against uncertain future currency movements Which of the following best identifies what these investors are seeking?

Accepted Answer

A)  A hedge 
B)  A discount 
C)  A spot rate 
D)  A bid-ask spread 
E)  An indirect quote 
A)  A hedge 
B)  A discount 
C)  A spot rate 
D)  A bid-ask spread 
E)  An indirect quote

Question 3

Whether the trade balance is positive (surplus)or negative (deficit)is important because it provides a measure of the financing needs of a particular country.Hence,the trade balance is more important than current account balance.

Accepted Answer

A) True 
 B)False

Question 4

What is dollarization?

Accepted Answer

A)  ​Using the dollar or some other foreign currency together with or instead of a domestic currency. 
B)  ​Pegging the value of a foreign currency against the U.S.dollar. 
C)  ​Pegging the value of a domestic currency against the market value of gold. 
D)  ​Increasing the price of goods based on the supply of money. 
E)  ​Maintaining an acceptable exchange rate based on government intervention. 
A)  ​Using the dollar or some other foreign currency together with or instead of a domestic currency. 
B)  ​Pegging the value of a foreign currency against the U.S.dollar. 
C)  ​Pegging the value of a domestic currency against the market value of gold. 
D)  ​Increasing the price of goods based on the supply of money. 
E)  ​Maintaining an acceptable exchange rate based on government intervention.

Question 5

The EMU introduced the euro as a new currency to replace the currencies of the member countries in the Eurozone,which has since grown to 29 members.

Accepted Answer

A) True 
 B)False

Question 6

The forex market consists of spot,forward,and discount markets.

Accepted Answer

A) True 
 B)False

Question 7

One forecasting approach is to use a multiple regression model to estimate the relationship between changes in spot rates and fundamental factors.

Accepted Answer

A) True 
 B)False

Question 8

A system that sets the values of major currencies based on their demand and supply in world currency markets are referred to as a(n)________ floating exchange rate system.

Accepted Answer

The answer of A system that sets the values of...

Question 9

Of the following,which is NOT listed in the text as a reason why currency values can change?

Accepted Answer

A)  Different price levels in different countries for the same goods and services 
B)  Price imbalances due to mispricing 
C)  Varying interest rates across countries 
D)  Price imbalances due to differential inflation 
E)  WTO mandates 
A)  Different price levels in different countries for the same goods and services 
B)  Price imbalances due to mispricing 
C)  Varying interest rates across countries 
D)  Price imbalances due to differential inflation 
E)  WTO mandates

Question 10

Which of the following regarding potential problems with an IRP is NOT true?

Accepted Answer

A)  Evidence on IRP theories is mixed. 
B)  Herd behavior can cause large purchases or sales of a particular currency that drive values beyond their normal bounds,resulting in problems such as currency crises. 
C)  When interest rates change in the U.S.,foreign interest rates should also change under the IRP.However,this may not happen. 
D)  International investors may globally diversify their investments and behave passively toward arbitrage activities. 
E)  There are no problems with IRP. 
A)  Evidence on IRP theories is mixed. 
B)  Herd behavior can cause large purchases or sales of a particular currency that drive values beyond their normal bounds,resulting in problems such as currency crises. 
C)  When interest rates change in the U.S.,foreign interest rates should also change under the IRP.However,this may not happen. 
D)  International investors may globally diversify their investments and behave passively toward arbitrage activities. 
E)  There are no problems with IRP.

Question 11

A statement of account that shows all transactions between the residents of one country and the rest of the world for a given period of time is called balance of ______.

Accepted Answer

The answer of A statement of account that shows all...

Question 12

According to the trade balance,the "+" sign refers to _____ and the "-" sign refers to _____.

Accepted Answer

A)  when foreigners use services in a country; when foreign services are used 
B)  when foreign services are used; when foreign services are used 
C)  incoming dollars coming in when merchandise is exported; dollars that leave the country to pay for imports 
D)  merchandise imports; incoming dollars 
E)  earnings from overseas investment; payments are sent overseas 
A)  when foreigners use services in a country; when foreign services are used 
B)  when foreign services are used; when foreign services are used 
C)  incoming dollars coming in when merchandise is exported; dollars that leave the country to pay for imports 
D)  merchandise imports; incoming dollars 
E)  earnings from overseas investment; payments are sent overseas

Question 13

The _____ reconciles any imbalance between the current account and financial account to ensure that all debit and credit entries in the balance of payments statement sum to zero.

Accepted Answer

A)  foreign direct investment 
B)  statistical discrepancy 
C)  security investment 
D)  risk premium 
E)  balance of transfers 
A)  foreign direct investment 
B)  statistical discrepancy 
C)  security investment 
D)  risk premium 
E)  balance of transfers

Question 14

One factor affecting change in currency values is different price levels in different countries for the same goods and services.

Accepted Answer

A) True 
 B)False

Question 15

____ float currency is a monetary system with minimal government intervention; largely market determined.

Accepted Answer

The answer of ____ float currency is a monetary system...

Question 16

Of the following,which is NOT true about the Bretton Woods System?

Accepted Answer

A)  It was established in 1965. 
B)  It established a global currency system based on a gold standard with the U.S.dollar pegged at a fixed rate of exchange to gold in an effort to control inflation. 
C)  The IMF was established under the Bretton Woods Agreement. 
D)  Eventually,major nations met to consider abandoning the Bretton Woods Agreement. 
E)  Under the Smithsonian Agreement,the U.S.devalued the dollar against other countries' currencies. 
A)  It was established in 1965. 
B)  It established a global currency system based on a gold standard with the U.S.dollar pegged at a fixed rate of exchange to gold in an effort to control inflation. 
C)  The IMF was established under the Bretton Woods Agreement. 
D)  Eventually,major nations met to consider abandoning the Bretton Woods Agreement. 
E)  Under the Smithsonian Agreement,the U.S.devalued the dollar against other countries' currencies.

Question 17

Which of the following is NOT a subaccount of the current account?

Accepted Answer

A)  Trade balance 
B)  Services balance 
C)  Income balance 
D)  Financial account 
E)  Net transfers 
A)  Trade balance 
B)  Services balance 
C)  Income balance 
D)  Financial account 
E)  Net transfers

Question 18

Acquisitions of a foreign company,creation of new manufacturing or research facilities abroad,and expansion of an existing plant in a foreign country are all examples of _____.

Accepted Answer

A)  foreign direct investment 
B)  a current balance account 
C)  a risk premium 
D)  a balance of transfers 
E)  net financial derivatives 
A)  foreign direct investment 
B)  a current balance account 
C)  a risk premium 
D)  a balance of transfers 
E)  net financial derivatives

Question 19

According to the text,_____ countries' exports are growing the fastest.

Accepted Answer

A)  North American 
B)  South American 
C)  Asian 
D)  African 
E)  European 
A)  North American 
B)  South American 
C)  Asian 
D)  African 
E)  European

Question 20

The statistical discrepancy line reconciles any remaining imbalance to ensure that all debit and credit entries in the BOP statement sum to zero.This line captures statistical inconsistencies in the recording of the credit and debit entries as well as illegal trade.

Accepted Answer

A) True 
 B)False

According to the law of one price,identical goods should sell for the same price in different countries according to the local currencies.

Whether the trade balance is positive (surplus)or negative (deficit)is important because it provides a measure of the financing needs of a particular country.Hence,the trade balance is more important than current account balance.

What is dollarization?

The EMU introduced the euro as a new currency to replace the currencies of the member countries in the Eurozone,which has since grown to 29 members.

The forex market consists of spot,forward,and discount markets.

One forecasting approach is to use a multiple regression model to estimate the relationship between changes in spot rates and fundamental factors.

A system that sets the values of major currencies based on their demand and supply in world currency markets are referred to as a(n)________ floating exchange rate system.

Of the following,which is NOT listed in the text as a reason why currency values can change?

Which of the following regarding potential problems with an IRP is NOT true?

A statement of account that shows all transactions between the residents of one country and the rest of the world for a given period of time is called balance of ______.

According to the trade balance,the "+" sign refers to _ and the "-" sign refers to _.

The _____ reconciles any imbalance between the current account and financial account to ensure that all debit and credit entries in the balance of payments statement sum to zero.

One factor affecting change in currency values is different price levels in different countries for the same goods and services.

____ float currency is a monetary system with minimal government intervention; largely market determined.

Of the following,which is NOT true about the Bretton Woods System?

Which of the following is NOT a subaccount of the current account?

Acquisitions of a foreign company,creation of new manufacturing or research facilities abroad,and expansion of an existing plant in a foreign country are all examples of _____.

According to the text,_____ countries' exports are growing the fastest.

The statistical discrepancy line reconciles any remaining imbalance to ensure that all debit and credit entries in the BOP statement sum to zero.This line captures statistical inconsistencies in the recording of the credit and debit entries as well as illegal trade.

The Rise of Globalization

The Evolution of International Business

Regional Economic Integration

The Cultural Environment of Global Business

The Legal,economic and Political Environment of Global Business

Entry Strategies in Global Business

Control of Global Business

Corruption and Ethics in Global Business

The Organization of Global Business

Global Human Resource Management

Global Marketing

Global Operations and Supply-Chain Management

Global Financial Management

Global Accounting and Taxation

Filters

Exam 4: The International Flow of Funds and Exchange Rates

According to the law of one price,identical goods should sell for the same price in different countries according to the local currencies.

Whether the trade balance is positive (surplus)or negative (deficit)is important because it provides a measure of the financing needs of a particular country.Hence,the trade balance is more important than current account balance.

What is dollarization?

The EMU introduced the euro as a new currency to replace the currencies of the member countries in the Eurozone,which has since grown to 29 members.

The forex market consists of spot,forward,and discount markets.

One forecasting approach is to use a multiple regression model to estimate the relationship between changes in spot rates and fundamental factors.

A system that sets the values of major currencies based on their demand and supply in world currency markets are referred to as a(n)________ floating exchange rate system.

Of the following,which is NOT listed in the text as a reason why currency values can change?

Which of the following regarding potential problems with an IRP is NOT true?

A statement of account that shows all transactions between the residents of one country and the rest of the world for a given period of time is called balance of ______.

According to the trade balance,the "+" sign refers to _____ and the "-" sign refers to _____.

The _____ reconciles any imbalance between the current account and financial account to ensure that all debit and credit entries in the balance of payments statement sum to zero.

One factor affecting change in currency values is different price levels in different countries for the same goods and services.

____ float currency is a monetary system with minimal government intervention; largely market determined.

Of the following,which is NOT true about the Bretton Woods System?

Which of the following is NOT a subaccount of the current account?

Acquisitions of a foreign company,creation of new manufacturing or research facilities abroad,and expansion of an existing plant in a foreign country are all examples of _____.

According to the text,_____ countries' exports are growing the fastest.

The statistical discrepancy line reconciles any remaining imbalance to ensure that all debit and credit entries in the BOP statement sum to zero.This line captures statistical inconsistencies in the recording of the credit and debit entries as well as illegal trade.

The Rise of Globalization

The Evolution of International Business

Regional Economic Integration

The Cultural Environment of Global Business

The Legal,economic and Political Environment of Global Business

Entry Strategies in Global Business

Control of Global Business

Corruption and Ethics in Global Business

The Organization of Global Business

Global Human Resource Management

Global Marketing

Global Operations and Supply-Chain Management

Global Financial Management

Global Accounting and Taxation

Filters

According to the trade balance,the "+" sign refers to _ and the "-" sign refers to _.