Question 1

The international Fisher effect says that interest rate differentials:

Accepted Answer

A)  predict exchange rate movement. 
B)  can be used to determine purchasing power parity. 
C)  are an example of the law of one price. 
D)  illustrate Pareto optimality. 
A)  predict exchange rate movement. 
B)  can be used to determine purchasing power parity. 
C)  are an example of the law of one price. 
D)  illustrate Pareto optimality.

Question 2

Sir Isaac Newton put England on the gold standard when he:

Accepted Answer

A)  declared, as master of the English mint, that he would sell gold for 1 pound, 1 shilling, 1 pence, under the law of one price. 
B)  set a market price for gold, the British pound and the U.S. dollar. 
C)  established a fixed equivalency between gold and the British currency. 
D)  brought the matter to Queen Anne, who declared Britain would follow the gold standard. 
A)  declared, as master of the English mint, that he would sell gold for 1 pound, 1 shilling, 1 pence, under the law of one price. 
B)  set a market price for gold, the British pound and the U.S. dollar. 
C)  established a fixed equivalency between gold and the British currency. 
D)  brought the matter to Queen Anne, who declared Britain would follow the gold standard.

Question 3

How might inflation influence the firm in its foreign markets?

Accepted Answer

Because inflation is beyond the control

Question 4

The price of gold since about 1200

Accepted Answer

A)  	trending downward. 
B)  	flat, keeping its value. 
C)  	wildly fluctuating. 
D)  	trending upward. 
A)  	trending downward. 
B)  	flat, keeping its value. 
C)  	wildly fluctuating. 
D)  	trending upward.

Question 5

A value-added tax is actually a sales tax that is:

Accepted Answer

A)  paid by the firm rather than the consumer. 
B)  paid in stages along the process from raw materials to consumer and then credited after final sale. 
C)  called value added to create a positive spin on taxation. 
D)  voluntarily paid on exports. 
A)  paid by the firm rather than the consumer. 
B)  paid in stages along the process from raw materials to consumer and then credited after final sale. 
C)  called value added to create a positive spin on taxation. 
D)  voluntarily paid on exports.

Question 6

As global financial markets become more integrated, we can expect countries' inflation rates to vary over a small range.

Accepted Answer

A) True 
 B)False

Question 7

The Fisher effect describes interest rate parity; it's the law of one price applied to interest rates. Interest rates vary to take into account anticipated differences in inflation levels.

Accepted Answer

A) True 
 B)False

Question 8

Financial forces such as inflation and taxation are considered uncontrollable because:

Accepted Answer

A)  there is nothing a manager can do to adjust to them, so the recommended approach is to ignore them. 
B)  they are external forces beyond the influence of the firm, around which a manager can manage. 
C)  they are external to the firm and their influence is to be avoided. 
D)  they are unpredictable. 
A)  there is nothing a manager can do to adjust to them, so the recommended approach is to ignore them. 
B)  they are external forces beyond the influence of the firm, around which a manager can manage. 
C)  they are external to the firm and their influence is to be avoided. 
D)  they are unpredictable.

Question 9

The balance-of-payments account is divided into the following three major subaccounts:

Accepted Answer

A)  trade, capital, and debt. 
B)  cash flow, assets, and reserves. 
C)  services, cash flow, and debt. 
D)  current, capital, and reserves. 
A)  trade, capital, and debt. 
B)  cash flow, assets, and reserves. 
C)  services, cash flow, and debt. 
D)  current, capital, and reserves.

Question 10

The Bretton Woods system led to minimal growth in international trade but helped to reduce inflation levels.

Accepted Answer

A) True 
 B)False

Question 11

The three main approaches to exchange rate forecasting are:

Accepted Answer

A)  the efficient market approach, the fundamental approach, and the technical approach. 
B)  the efficient market approach, the random walk hypothesis, and the pragmatic approach. 
C)  the random walk hypothesis, the pragmatic approach, and the fundamental approach. 
D)  none of the above. 
A)  the efficient market approach, the fundamental approach, and the technical approach. 
B)  the efficient market approach, the random walk hypothesis, and the pragmatic approach. 
C)  the random walk hypothesis, the pragmatic approach, and the fundamental approach. 
D)  none of the above.

Question 12

The balance of payments is a record of a country's transactions with its major trading partners.

Accepted Answer

A) True 
 B)False

Question 13

Tariffs are not a financial force; they are a political force.

Accepted Answer

A) True 
 B)False

Question 14

One exchange arrangement is to have no separate legal tender.

Accepted Answer

A) True 
 B)False

Question 15

Withholding tax is:

Accepted Answer

A)  an indirect tax paid by employers before employees receive salaries. 
B)  a direct tax levied on earned income. 
C)  a 30 percent tax levied on foreign residents. 
D)  an indirect tax levied on passive income. 
A)  an indirect tax paid by employers before employees receive salaries. 
B)  a direct tax levied on earned income. 
C)  a 30 percent tax levied on foreign residents. 
D)  an indirect tax levied on passive income.

Question 16

When a government requires a permit to purchase foreign currency, the exchange rates:

Accepted Answer

A)  are market-driven. 
B)  can be negotiated by the firm. 
C)  are unpredictable. 
D)  are set by the government, often above the free market rate. 
A)  are market-driven. 
B)  can be negotiated by the firm. 
C)  are unpredictable. 
D)  are set by the government, often above the free market rate.

Question 17

The Eonomist's Big Mac index (May 2010) suggests that against the dollar, the Chinese yuan is:

Accepted Answer

A)  trading fairly, since the Big Mac prices are similar. 
B)  quite undervalued, since the Chinese Big Mac is almost 50 percent less expensive than the U.S.-dollar Big Mac. 
C)  is overvalued, since the Big Mac sells for almost 50 percent less in Chinese currency than in U.S. dollars. 
D)  trading at a historical premium. 
A)  trading fairly, since the Big Mac prices are similar. 
B)  quite undervalued, since the Chinese Big Mac is almost 50 percent less expensive than the U.S.-dollar Big Mac. 
C)  is overvalued, since the Big Mac sells for almost 50 percent less in Chinese currency than in U.S. dollars. 
D)  trading at a historical premium.

Question 18

Countries put limitations on the convertibility of their currency when they are concerned that:

Accepted Answer

A)  there is too much domestic spending. 
B)  foreigners will hold control of their monetary policy. 
C)  their foreign reserves could be depleted. 
D)  there is not enough domestic spending. 
A)  there is too much domestic spending. 
B)  foreigners will hold control of their monetary policy. 
C)  their foreign reserves could be depleted. 
D)  there is not enough domestic spending.

Question 19

The Big Mac index is an example of purchasing power parity, an international measure of junk-food consumption.

Accepted Answer

A) True 
 B)False

Question 20

The Bank for International Settlements operates as the banker for central banks.

Accepted Answer

A) True 
 B)False

The international Fisher effect says that interest rate differentials:

Sir Isaac Newton put England on the gold standard when he:

How might inflation influence the firm in its foreign markets?

The price of gold since about 1200

A value-added tax is actually a sales tax that is:

As global financial markets become more integrated, we can expect countries' inflation rates to vary over a small range.

The Fisher effect describes interest rate parity; it's the law of one price applied to interest rates. Interest rates vary to take into account anticipated differences in inflation levels.

Financial forces such as inflation and taxation are considered uncontrollable because:

The balance-of-payments account is divided into the following three major subaccounts:

The Bretton Woods system led to minimal growth in international trade but helped to reduce inflation levels.

The three main approaches to exchange rate forecasting are:

The balance of payments is a record of a country's transactions with its major trading partners.

Tariffs are not a financial force; they are a political force.

One exchange arrangement is to have no separate legal tender.

Withholding tax is:

When a government requires a permit to purchase foreign currency, the exchange rates:

The Eonomist's Big Mac index (May 2010) suggests that against the dollar, the Chinese yuan is:

Countries put limitations on the convertibility of their currency when they are concerned that:

The Big Mac index is an example of purchasing power parity, an international measure of junk-food consumption.

The Bank for International Settlements operates as the banker for central banks.

The Challenging World of International Business

International Trade and Foreign Direct Investment

International Institutions From an International Business Perspective

Sociocultural Forces

Natural Resources and Environmental Sustainability

Political and Trade Forces

Intellectual Property and Other Legal Forces

International Competitive Strategy

Organizational Design and Control

Global Leadership Issues and Practices

Assessing International Markets

Entry Modes

Export and Import Practices

Marketing Internationally

Global Operations and Supply Chain Management

Managing Human Resources in an International Context

International Accounting and Financial Management

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Exam 8: The International Monetary System and Financial Forces

The international Fisher effect says that interest rate differentials:

Sir Isaac Newton put England on the gold standard when he:

How might inflation influence the firm in its foreign markets?

The price of gold since about 1200

A value-added tax is actually a sales tax that is:

As global financial markets become more integrated, we can expect countries' inflation rates to vary over a small range.

The Fisher effect describes interest rate parity; it's the law of one price applied to interest rates. Interest rates vary to take into account anticipated differences in inflation levels.

Financial forces such as inflation and taxation are considered uncontrollable because:

The balance-of-payments account is divided into the following three major subaccounts:

The Bretton Woods system led to minimal growth in international trade but helped to reduce inflation levels.

The three main approaches to exchange rate forecasting are:

The balance of payments is a record of a country's transactions with its major trading partners.

Tariffs are not a financial force; they are a political force.

One exchange arrangement is to have no separate legal tender.

Withholding tax is:

When a government requires a permit to purchase foreign currency, the exchange rates:

The Eonomist's Big Mac index (May 2010) suggests that against the dollar, the Chinese yuan is:

Countries put limitations on the convertibility of their currency when they are concerned that:

The Big Mac index is an example of purchasing power parity, an international measure of junk-food consumption.

The Bank for International Settlements operates as the banker for central banks.

The Challenging World of International Business

International Trade and Foreign Direct Investment

International Institutions From an International Business Perspective

Sociocultural Forces

Natural Resources and Environmental Sustainability

Political and Trade Forces

Intellectual Property and Other Legal Forces

International Competitive Strategy

Organizational Design and Control

Global Leadership Issues and Practices

Assessing International Markets

Entry Modes

Export and Import Practices

Marketing Internationally

Global Operations and Supply Chain Management

Managing Human Resources in an International Context

International Accounting and Financial Management

Filters