Question 1

In a fixed exchange rate policy,which of the following involves setting the exchange rate of the domestic currency in terms of another currency?

Accepted Answer

A)  Currency swap 
B)  Pegging 
C)  Crawling bands 
D)  Spread 
A)  Currency swap 
B)  Pegging 
C)  Crawling bands 
D)  Spread B

Question 2

Under the gold standard,every central bank needed to maintain gold reserves in order to be able to redeem its currency in gold at a fixed price.

Accepted Answer

A) True 
 B)False  True

Question 3

From an institution-based view and a resource-based view,explain the factors that determine the success and failure of currency management around the globe.

Accepted Answer

The answer boils down to two components.First,from an institution-based standpoint,the changing rules of the game-economic,political,and psychological-enable or constrain firms.For example,Swiss exporters' frustration with the appreciation of the Swiss franc relative to the euro stems from the centuries-old policy of Switzerland to maintain its political and economic independence.While all of Switzerland's neighbors have joined the EU and adopted the euro,Switzerland will not.Second,from a resource-based perspective,how firms develop valuable,unique,and hard-to-imitate capabilities in currency management may make or break them.

Question 4

What is the difference between a clean float and a dirty float?

Accepted Answer

A)  Most countries adopt a clean float policy while the dirty float policy is rare in practice 
B)  A clean float involves upper management policy interventions 
C)  A dirty float uses selective government interventions to determine exchange rates 
D)  A dirty float relies solely on the market to determine exchange rate 
A)  Most countries adopt a clean float policy while the dirty float policy is rare in practice 
B)  A clean float involves upper management policy interventions 
C)  A dirty float uses selective government interventions to determine exchange rates 
D)  A dirty float relies solely on the market to determine exchange rate

Question 5

Today we live in a post-Bretton Woods system which has no official common denominator and is characterized by a diversity of exchange rate systems.

Accepted Answer

A) True 
 B)False

Question 6

The International Monetary Fund (IMF)offers grants to member countries.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is NOT a criticism of the IMF?

Accepted Answer

A)  The IMF's lending may facilitate moral hazard when people and organizations do not have to face the full consequences of their actions. 
B)  The IMF's "one-size-fits-all" strategy-otherwise known as the "bitter medicine"-may be inappropriate. 
C)  None of the IMF officials is democratically elected and most of them do not have deep knowledge of the host country. 
D)  Many countries run immediately to the IMF to fix their financial problems instead of adopting reforms within. 
A)  The IMF's lending may facilitate moral hazard when people and organizations do not have to face the full consequences of their actions. 
B)  The IMF's "one-size-fits-all" strategy-otherwise known as the "bitter medicine"-may be inappropriate. 
C)  None of the IMF officials is democratically elected and most of them do not have deep knowledge of the host country. 
D)  Many countries run immediately to the IMF to fix their financial problems instead of adopting reforms within.

Question 8

Explain the Bretton Woods system and the reasons for its demise.

Accepted Answer

The Bretton Woods system was centered on

Question 9

Lumberne,a country,reviews its international transaction statement to assess its performance in international trade.This transaction statement contains accurate details on merchandise trade,service trade,and capital movement.Such a transaction statement is called the _____.

Accepted Answer

A)  purchasing power parity (PPP) 
B)  common denominator 
C)  balance of payments (BOP) 
D)  capital flight 
A)  purchasing power parity (PPP) 
B)  common denominator 
C)  balance of payments (BOP) 
D)  capital flight

Question 10

In the context of foreign exchange rate,an appreciation is a loss in the value of a currency.

Accepted Answer

A) True 
 B)False

Question 11

Chang Lee deals with foreign exchange.He exchanged 800 Chinese yuan for US dollars.He sold the US dollars 180 days after his initial transaction.In this scenario,which of the following types of foreign exchange transaction has Chang Lee used?

Accepted Answer

A)  Spot exchange 
B)  Spot transaction 
C)  Currency swap 
D)  Forward transaction 
A)  Spot exchange 
B)  Spot transaction 
C)  Currency swap 
D)  Forward transaction

Question 12

The Greyon Bank in Australia has an excess balance of euros but is in need of dollars.Similarly,Huran Bank in the US has an excess of dollars and is currently in need of euros.The two banks agree to exchange euros for dollars now and dollars for euros at a later date.This type of foreign exchange transaction is an example of _____.

Accepted Answer

A)  currency hedging 
B)  spot transaction 
C)  currency swap 
D)  forward transaction 
A)  currency hedging 
B)  spot transaction 
C)  currency swap 
D)  forward transaction

Question 13

The _____ consists of exports minus imports of merchandise and services,plus income on a country's assets abroad minus payments on foreign assets in the focal country,plus unilateral government transfers and private remittances.

Accepted Answer

A)  current account balance 
B)  statement of retained earnings 
C)  cash flow statement 
D)  statement of changes in equity 
A)  current account balance 
B)  statement of retained earnings 
C)  cash flow statement 
D)  statement of changes in equity

Question 14

The demand for dollars is much stronger than any other currency because:

Accepted Answer

A)  the dollar is the common transaction currency involving both US.imports and US.exports. 
B)  supply of the US.dollar is significantly higher than other currencies. 
C)  the price of the dollar is much lower compared to the currencies of other countries. 
D)  the US dollar is nonconvertible in other countries. 
A)  the dollar is the common transaction currency involving both US.imports and US.exports. 
B)  supply of the US.dollar is significantly higher than other currencies. 
C)  the price of the dollar is much lower compared to the currencies of other countries. 
D)  the US dollar is nonconvertible in other countries.

Question 15

Which of the following is true of the theory of purchasing power parity (PPP)?

Accepted Answer

A)  It suggests that in the long run,exchange rates should move toward levels that would equalize the prices of an identical basket of goods in any two countries. 
B)  It encourages traders to buy low and sell high,eventually driving different prices for identical products to the same level around the world. 
C)  It suggests that the price for identical products sold in different countries should be controlled purely by the supply and demand of those goods. 
D)  It increases the disparity of prices for identical products from different countries. 
A)  It suggests that in the long run,exchange rates should move toward levels that would equalize the prices of an identical basket of goods in any two countries. 
B)  It encourages traders to buy low and sell high,eventually driving different prices for identical products to the same level around the world. 
C)  It suggests that the price for identical products sold in different countries should be controlled purely by the supply and demand of those goods. 
D)  It increases the disparity of prices for identical products from different countries.

Question 16

Which of the following statements is NOT true of the IMF?

Accepted Answer

A)  The IMF's mandate is to promote international monetary cooperation,exchange stability,and orderly exchange arrangements. 
B)  It is an enduring legacy of the Bretton Woods system. 
C)  IMF loans usually have to be repaid in one to five years,although payments have been extended in some cases. 
D)  Each member country has equal capacity to borrow money from the IMF and equal voting powers. 
A)  The IMF's mandate is to promote international monetary cooperation,exchange stability,and orderly exchange arrangements. 
B)  It is an enduring legacy of the Bretton Woods system. 
C)  IMF loans usually have to be repaid in one to five years,although payments have been extended in some cases. 
D)  Each member country has equal capacity to borrow money from the IMF and equal voting powers.

Question 17

In the context of interest rates and money supply,quantitative easing:

Accepted Answer

A)  leads to appreciation in the value of a country's currency. 
B)  tends to stimulate inflation with more currency. 
C)  decreases the per unit value of a currency. 
D)  attracts foreign funds. 
A)  leads to appreciation in the value of a country's currency. 
B)  tends to stimulate inflation with more currency. 
C)  decreases the per unit value of a currency. 
D)  attracts foreign funds.

Question 18

Lumeria,a country,headquarters many multinational enterprises.Its inflation rate is high relative to other countries.In this case,which of the following is most likely to happen?

Accepted Answer

A)  The exchange rate of Lumeria's currency will drop. 
B)  Lumeria will be able to attract foreign funds. 
C)  Goods in Lumeria's economy will multiply. 
D)  Money supply will decrease in Lumeria. 
A)  The exchange rate of Lumeria's currency will drop. 
B)  Lumeria will be able to attract foreign funds. 
C)  Goods in Lumeria's economy will multiply. 
D)  Money supply will decrease in Lumeria.

Question 19

Investors-currency traders,foreign portfolio investors,and average citizens-may move in the same direction at the same time,like a herd,resulting in the _____.

Accepted Answer

A)  Matthew effect 
B)  bandwagon effect 
C)  snob effect 
D)  Veblen effect 
A)  Matthew effect 
B)  bandwagon effect 
C)  snob effect 
D)  Veblen effect

Question 20

The nature of the electronically linked global foreign exchange market is leading to firms taking more time on decisions about buying and selling on the foreign exchange market.

Accepted Answer

A) True 
 B)False

In a fixed exchange rate policy,which of the following involves setting the exchange rate of the domestic currency in terms of another currency?

Under the gold standard,every central bank needed to maintain gold reserves in order to be able to redeem its currency in gold at a fixed price.

From an institution-based view and a resource-based view,explain the factors that determine the success and failure of currency management around the globe.

What is the difference between a clean float and a dirty float?

Today we live in a post-Bretton Woods system which has no official common denominator and is characterized by a diversity of exchange rate systems.

The International Monetary Fund (IMF)offers grants to member countries.

Which of the following statements is NOT a criticism of the IMF?

Explain the Bretton Woods system and the reasons for its demise.

Lumberne,a country,reviews its international transaction statement to assess its performance in international trade.This transaction statement contains accurate details on merchandise trade,service trade,and capital movement.Such a transaction statement is called the _____.

In the context of foreign exchange rate,an appreciation is a loss in the value of a currency.

Chang Lee deals with foreign exchange.He exchanged 800 Chinese yuan for US dollars.He sold the US dollars 180 days after his initial transaction.In this scenario,which of the following types of foreign exchange transaction has Chang Lee used?

The _____ consists of exports minus imports of merchandise and services,plus income on a country's assets abroad minus payments on foreign assets in the focal country,plus unilateral government transfers and private remittances.

The demand for dollars is much stronger than any other currency because:

Which of the following is true of the theory of purchasing power parity (PPP)?

Which of the following statements is NOT true of the IMF?

In the context of interest rates and money supply,quantitative easing:

Lumeria,a country,headquarters many multinational enterprises.Its inflation rate is high relative to other countries.In this case,which of the following is most likely to happen?

Investors-currency traders,foreign portfolio investors,and average citizens-may move in the same direction at the same time,like a herd,resulting in the _____.

The nature of the electronically linked global foreign exchange market is leading to firms taking more time on decisions about buying and selling on the foreign exchange market.

Globalizing Business

Understanding Politics Laws Economics

Emphasizing Cultures Ethics Norms

Leveraging Resources Capabilities

Trading Internationally

Investing Abroad Directly

Capitalizing On Global Regional Integration

Growing Internationalizing The Entrepreneurial Firm

Entering Foreign Markets

Making Alliances Acquisitions Work

Strategizing Structuring Learning Around The World

Managing Human Resources Globally

Competing On Marketing and Supply Chain Management

Managing Corporate Social Responsibility Globally

Filters

Exam 7: Dealing With Foreign Exchange

In a fixed exchange rate policy,which of the following involves setting the exchange rate of the domestic currency in terms of another currency?

Under the gold standard,every central bank needed to maintain gold reserves in order to be able to redeem its currency in gold at a fixed price.

From an institution-based view and a resource-based view,explain the factors that determine the success and failure of currency management around the globe.

What is the difference between a clean float and a dirty float?

Today we live in a post-Bretton Woods system which has no official common denominator and is characterized by a diversity of exchange rate systems.

The International Monetary Fund (IMF)offers grants to member countries.

Which of the following statements is NOT a criticism of the IMF?

Explain the Bretton Woods system and the reasons for its demise.

Lumberne,a country,reviews its international transaction statement to assess its performance in international trade.This transaction statement contains accurate details on merchandise trade,service trade,and capital movement.Such a transaction statement is called the _____.

In the context of foreign exchange rate,an appreciation is a loss in the value of a currency.

Chang Lee deals with foreign exchange.He exchanged 800 Chinese yuan for US dollars.He sold the US dollars 180 days after his initial transaction.In this scenario,which of the following types of foreign exchange transaction has Chang Lee used?

The _____ consists of exports minus imports of merchandise and services,plus income on a country's assets abroad minus payments on foreign assets in the focal country,plus unilateral government transfers and private remittances.

The demand for dollars is much stronger than any other currency because:

Which of the following is true of the theory of purchasing power parity (PPP)?

Which of the following statements is NOT true of the IMF?

In the context of interest rates and money supply,quantitative easing:

Lumeria,a country,headquarters many multinational enterprises.Its inflation rate is high relative to other countries.In this case,which of the following is most likely to happen?

Investors-currency traders,foreign portfolio investors,and average citizens-may move in the same direction at the same time,like a herd,resulting in the _____.

The nature of the electronically linked global foreign exchange market is leading to firms taking more time on decisions about buying and selling on the foreign exchange market.

Globalizing Business

Understanding Politics Laws Economics

Emphasizing Cultures Ethics Norms

Leveraging Resources Capabilities

Trading Internationally

Investing Abroad Directly

Capitalizing On Global Regional Integration

Growing Internationalizing The Entrepreneurial Firm

Entering Foreign Markets

Making Alliances Acquisitions Work

Strategizing Structuring Learning Around The World

Managing Human Resources Globally

Competing On Marketing and Supply Chain Management

Managing Corporate Social Responsibility Globally

Filters