Question 1

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

Accepted Answer

The answer of What is a Special Drawing Right (SDR)?...

Question 2

Which of the following BEST describes the special drawing right?

Accepted Answer

A) an international reserve asset created to supplement members' existing reserve assets 
B) the official currency for international trade established by the World Bank 
C) a substitute for the fixed value of gold as determined by currency rates 
D) a contribution made by countries to join the IMF

Question 3

In a country with a currency that is not freely floating, the timing of an exchange rate change is often a ________ decision.

Accepted Answer

A) cultural 
B) consensus 
C) political 
D) market

Question 4

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

Question 5

The three variables predicted by forecasting are the timing, magnitude, and length of exchange rate movements.

Accepted Answer

A) True 
 B)False

Question 6

Ted, a manager at Global Manufacturing, is analyzing trends in economic variables to predict future exchange rates that might affect the MNE's international operations.Which of the following is Ted most likely doing?

Accepted Answer

A) fundamental forecasting 
B) technical forecasting 
C) resource forecasting 
D) economic forecasting

Question 7

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

Question 8

If the real interest rate is 5%, the rate of inflation in the United States is 6%, and the rate of inflation in the United Kingdom is 3%, which of the following statements would NOT be true?

Accepted Answer

A) The nominal rate of interest in the United States would be greater than the nominal interest rate in the United Kingdom. 
B) The difference between the U.K. and U.S. interest rates is a function of the difference between their inflation rates. 
C) The nominal rate of interest in the United States and the United Kingdom would be the same because of purchasing power parity. 
D) Investors would get a higher return on their money in the United States.

Question 9

A country's central bank is responsible for ________.

Accepted Answer

A) distributing money to foreign countries that are in a debt crisis 
B) encouraging disorderly conditions in foreign-exchange markets 
C) the policies affecting the value of its country's currency 
D) establishing foreign-exchange markets

Question 10

Craig, a manager at a global firm, is studying the cyclical nature of growth and employment as a part of the process to forecast exchange rates.Which factor is Craig most likely monitoring?

Accepted Answer

A) the institutional setting 
B) fundamental analyses 
C) cultural analyses 
D) circumstances

Question 11

________ is a form of locking the value of a country's currency onto another currency.

Accepted Answer

A) Managed floating 
B) Monetarization 
C) Dollarization 
D) Floating

Question 12

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.

Question 13

The IMF's primary role is to identify exchange rate regimes.

Accepted Answer

A) True 
 B)False

Question 14

Which EU country has NOT adopted the euro?

Accepted Answer

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

Question 15

A technical forecaster is also known as a ________.

Accepted Answer

A) CFO 
B) de facto economist 
C) chartist 
D) monetary administrator

Question 16

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.

Question 17

Country X has a floating rate for luxury goods and a lower rate for semi-manufactured goods.Which of the following is most likely used by Country X?

Accepted Answer

A) import deposit requirements 
B) multiple exchange rates 
C) import licensing 
D) quantity controls

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Although central banks are responsible for foreign-exchange policy, they have no power to intervene in exchange rate markets.

Accepted Answer

A) True 
 B)False

Question 20

The major objective of the European Central Bank is to control taxes as a means of deficit spending.

Accepted Answer

A) True 
 B)False

Exam 10: The Determination of Exchange Rates

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

Which of the following BEST describes the special drawing right?

In a country with a currency that is not freely floating, the timing of an exchange rate change is often a ________ decision.

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

The three variables predicted by forecasting are the timing, magnitude, and length of exchange rate movements.

Ted, a manager at Global Manufacturing, is analyzing trends in economic variables to predict future exchange rates that might affect the MNE's international operations.Which of the following is Ted most likely doing?

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

If the real interest rate is 5%, the rate of inflation in the United States is 6%, and the rate of inflation in the United Kingdom is 3%, which of the following statements would NOT be true?

A country's central bank is responsible for ________.

Craig, a manager at a global firm, is studying the cyclical nature of growth and employment as a part of the process to forecast exchange rates.Which factor is Craig most likely monitoring?

________ is a form of locking the value of a country's currency onto another currency.

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?

The IMF's primary role is to identify exchange rate regimes.

Which EU country has NOT adopted the euro?

A technical forecaster is also known as a ________.

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

Country X has a floating rate for luxury goods and a lower rate for semi-manufactured goods.Which of the following is most likely used by Country X?

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

Although central banks are responsible for foreign-exchange policy, they have no power to intervene in exchange rate markets.

The major objective of the European Central Bank is to control taxes as a means of deficit spending.