Question 1

The effect of investors moving in the same direction at the same time leads to a bandwagon effect.

Accepted Answer

A) True 
 B)False

Question 2

The bandwagon effect is an example of the way _____ directly affects foreign exchange rates.

Accepted Answer

A)  exchange rate policy 
B)  investor psychology 
C)  purchasing power parity 
D)  balance of payments 
A)  exchange rate policy 
B)  investor psychology 
C)  purchasing power parity 
D)  balance of payments

Question 3

Which of the following conditions will attract foreign funds into a country?

Accepted Answer

A)  If the country has high trade deficits 
B)  If the country's interest rate is relatively high compared to other countries 
C)  If the country's currency is depreciated 
D)  If the country is experiencing high levels of inflation 
A)  If the country has high trade deficits 
B)  If the country's interest rate is relatively high compared to other countries 
C)  If the country's currency is depreciated 
D)  If the country is experiencing high levels of inflation

Question 4

Describe what it means for a country to peg its currency to another,and give two benefits to adopting this policy.

Accepted Answer

Pegging is a stabilizing policy of linki

Question 5

_____ have specified upper or lower bounds within which the exchange rate is allowed to fluctuate.

Accepted Answer

A)  Fixed exchange rates 
B)  Target exchange rates 
C)  Free float exchange rates 
D)  Dirty float exchange rates 
A)  Fixed exchange rates 
B)  Target exchange rates 
C)  Free float exchange rates 
D)  Dirty float exchange rates

Question 6

_____ is defined as the conversion of one currency into another at Time 1,with an agreement to revert it back to the original currency at a specific Time 2 in the future.

Accepted Answer

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

Question 7

Majority of the largest US firms practice currency hedging.

Accepted Answer

A) True 
 B)False

Question 8

A country's current account deficit can only be financed using its savings.

Accepted Answer

A) True 
 B)False

Question 9

The foreign exchange markets are influenced only by economic factors and free from the effect of social or political pressures.

Accepted Answer

A) True 
 B)False

Question 10

Basic economic theory suggests that the price of a commodity is most fundamentally determined by its supply and demand.

Accepted Answer

A) True 
 B)False

Question 11

Identify the difference between fixed and floating exchange rates.Provide an example of a situation where the fixed and floating exchange rates were used.

Accepted Answer

A fixed exchange rate involves a country

Question 12

The Bretton Woods system was centered on the British pound as the new common denominator.

Accepted Answer

A) True 
 B)False

Question 13

Forward discount is a condition under which the forward rate of one currency relative to another currency is lower than the spot rate.

Accepted Answer

A) True 
 B)False

Question 14

Many countries with high inflation have pegged their currencies to the yuan in order to restrain domestic inflation.

Accepted Answer

A) True 
 B)False

Question 15

An appreciation is an increase in the value of the currency whereas a depreciation is a loss in the value of the currency.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following characterizes the peg policy in foreign exchange rates?

Accepted Answer

A)  It links a developed country's currency to the gold standard. 
B)  It stabilizes the import and export prices for developing countries. 
C)  It is a type of floating exchange rate policy. 
D)  It is primarily used by developed countries to control inflation. 
A)  It links a developed country's currency to the gold standard. 
B)  It stabilizes the import and export prices for developing countries. 
C)  It is a type of floating exchange rate policy. 
D)  It is primarily used by developed countries to control inflation.

Question 17

_____ refers to non-financial companies spreading out its activities in different currency zones in order to offset the currency losses in certain regions through gains in other regions.

Accepted Answer

A)  Currency hedging 
B)  Currency pegging 
C)  Strategic hedging 
D)  Currency swapping 
A)  Currency hedging 
B)  Currency pegging 
C)  Strategic hedging 
D)  Currency swapping

Question 18

Proponents of fixed exchange rates argue that fixed exchange rates impose monetary discipline by preventing governments from engaging in inflationary monetary policies.

Accepted Answer

A) True 
 B)False

Question 19

Proponents of fixed exchange rates believe that market forces should take care of supply,demand,and price of any currency.

Accepted Answer

A) True 
 B)False

Question 20

The weight a member country carries within the IMF,which determines the amount of its financial contribution,its capacity to borrow from the IMF,and its voting power is referred to as a(n)_____.

Accepted Answer

A)  grant 
B)  accommodation 
C)  quota 
D)  balance of payment 
A)  grant 
B)  accommodation 
C)  quota 
D)  balance of payment

The effect of investors moving in the same direction at the same time leads to a bandwagon effect.

The bandwagon effect is an example of the way _____ directly affects foreign exchange rates.

Which of the following conditions will attract foreign funds into a country?

Describe what it means for a country to peg its currency to another,and give two benefits to adopting this policy.

_____ have specified upper or lower bounds within which the exchange rate is allowed to fluctuate.

_____ is defined as the conversion of one currency into another at Time 1,with an agreement to revert it back to the original currency at a specific Time 2 in the future.

Majority of the largest US firms practice currency hedging.

A country's current account deficit can only be financed using its savings.

The foreign exchange markets are influenced only by economic factors and free from the effect of social or political pressures.

Basic economic theory suggests that the price of a commodity is most fundamentally determined by its supply and demand.

Identify the difference between fixed and floating exchange rates.Provide an example of a situation where the fixed and floating exchange rates were used.

The Bretton Woods system was centered on the British pound as the new common denominator.

Forward discount is a condition under which the forward rate of one currency relative to another currency is lower than the spot rate.

Many countries with high inflation have pegged their currencies to the yuan in order to restrain domestic inflation.

An appreciation is an increase in the value of the currency whereas a depreciation is a loss in the value of the currency.

Which of the following characterizes the peg policy in foreign exchange rates?

_____ refers to non-financial companies spreading out its activities in different currency zones in order to offset the currency losses in certain regions through gains in other regions.

Proponents of fixed exchange rates argue that fixed exchange rates impose monetary discipline by preventing governments from engaging in inflationary monetary policies.

Proponents of fixed exchange rates believe that market forces should take care of supply,demand,and price of any currency.

The weight a member country carries within the IMF,which determines the amount of its financial contribution,its capacity to borrow from the IMF,and its voting power is referred to as a(n)_____.

Globalizing Business

Understanding Formal Institutions: Politics, Laws, and Economics

Emphasizing Informal Institutions: Cultures, Ethics, and Norms

Leveraging Resources and Capabilities

Trading Internationally

Investing Abroad Directly

Capitalizing on Global and Regional Integration

Growing and Internationalizing the Entrepreneurial Firm

Entering Foreign Markets

Managing Global Competitive Dynamics

Making Alliances and Acquisitions Work

Strategizing,Structuring,and Learning around the World

Competing on Marketing and Supply Chain Management

Managing Human Resources Globally

Financing and Governing the Corporation Globally

Managing Corporate Social Responsibility Globally

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Exam 7: Dealing with Foreign Exchange

The effect of investors moving in the same direction at the same time leads to a bandwagon effect.

The bandwagon effect is an example of the way _____ directly affects foreign exchange rates.

Which of the following conditions will attract foreign funds into a country?

Describe what it means for a country to peg its currency to another,and give two benefits to adopting this policy.

_____ have specified upper or lower bounds within which the exchange rate is allowed to fluctuate.

_____ is defined as the conversion of one currency into another at Time 1,with an agreement to revert it back to the original currency at a specific Time 2 in the future.

Majority of the largest US firms practice currency hedging.

A country's current account deficit can only be financed using its savings.

The foreign exchange markets are influenced only by economic factors and free from the effect of social or political pressures.

Basic economic theory suggests that the price of a commodity is most fundamentally determined by its supply and demand.

Identify the difference between fixed and floating exchange rates.Provide an example of a situation where the fixed and floating exchange rates were used.

The Bretton Woods system was centered on the British pound as the new common denominator.

Forward discount is a condition under which the forward rate of one currency relative to another currency is lower than the spot rate.

Many countries with high inflation have pegged their currencies to the yuan in order to restrain domestic inflation.

An appreciation is an increase in the value of the currency whereas a depreciation is a loss in the value of the currency.

Which of the following characterizes the peg policy in foreign exchange rates?

_____ refers to non-financial companies spreading out its activities in different currency zones in order to offset the currency losses in certain regions through gains in other regions.

Proponents of fixed exchange rates argue that fixed exchange rates impose monetary discipline by preventing governments from engaging in inflationary monetary policies.

Proponents of fixed exchange rates believe that market forces should take care of supply,demand,and price of any currency.

The weight a member country carries within the IMF,which determines the amount of its financial contribution,its capacity to borrow from the IMF,and its voting power is referred to as a(n)_____.

Globalizing Business

Understanding Formal Institutions: Politics, Laws, and Economics

Emphasizing Informal Institutions: Cultures, Ethics, and Norms

Leveraging Resources and Capabilities

Trading Internationally

Investing Abroad Directly

Capitalizing on Global and Regional Integration

Growing and Internationalizing the Entrepreneurial Firm

Entering Foreign Markets

Managing Global Competitive Dynamics

Making Alliances and Acquisitions Work

Strategizing,Structuring,and Learning around the World

Competing on Marketing and Supply Chain Management

Managing Human Resources Globally

Financing and Governing the Corporation Globally

Managing Corporate Social Responsibility Globally

Filters