Question 1

Which of the following occurs when a government increases money supply?

Accepted Answer

A) It results in an overall decrease in credit. 
B) It makes it difficult for individuals and companies to borrow from banks. 
C) It makes it easier for banks to borrow from the government. 
D) It causes a decrease in demand for goods and services. 
A) It results in an overall decrease in credit. 
B) It makes it difficult for individuals and companies to borrow from banks. 
C) It makes it easier for banks to borrow from the government. 
D) It causes a decrease in demand for goods and services.

Question 2

A currency is said to be _____ when only nonresidents may convert it into a foreign currency without any limitations.

Accepted Answer

A) externally convertible 
B) nonconvertible 
C) partly convertible 
D) freely convertible 
A) externally convertible 
B) nonconvertible 
C) partly convertible 
D) freely convertible

Question 3

Why has the newsmagazine The Economist selected McDonald's Big Mac as a proxy for a "basket of goods" in publishing its own version of the PPP theorem?

Accepted Answer

A) Because McDonald's holds the title rights for the index till 2015 
B) Because Big Mac is produced according to the same recipe in about 120 countries 
C) Because Big Mac is the most popular hamburger in the world 
D) Because no other product is available in all countries of the world 
A) Because McDonald's holds the title rights for the index till 2015 
B) Because Big Mac is produced according to the same recipe in about 120 countries 
C) Because Big Mac is the most popular hamburger in the world 
D) Because no other product is available in all countries of the world

Question 4

The integration of financial centers implies there can be no significant difference in exchange rates quoted in the foreign exchange trading centers.

Accepted Answer

A) True 
 B)False

Question 5

Differentiate between a lead strategy and a lag strategy.

Accepted Answer

A lead strategy involves attempting to c

Question 6

Which of the following analysis is based on the premise that there are analyzable market trends and waves and that previous trends and waves can be used to predict future trends and waves?

Accepted Answer

A) Variable analysis 
B) Fundamental analysis 
C) SWOT analysis 
D) Technical analysis 
A) Variable analysis 
B) Fundamental analysis 
C) SWOT analysis 
D) Technical analysis

Question 7

Capital flight is most likely to occur when the value of the domestic currency depreciates because of deflation.

Accepted Answer

A) True 
 B)False

Question 8

Dominant enterprises in an industry may be able to exercise a degree of pricing power,setting different prices in different markets to reflect varying demand conditions.This is referred to as:

Accepted Answer

A) price discrimination. 
B) price fixing. 
C) price war. 
D) price skimming. 
A) price discrimination. 
B) price fixing. 
C) price war. 
D) price skimming.

Question 9

The _____ is the rate at which one currency is converted into another.

Accepted Answer

A) LIBOR 
B) reference rate 
C) exchange rate 
D) par value 
A) LIBOR 
B) reference rate 
C) exchange rate 
D) par value

Question 10

Borrowing or lending of funds in foreign currencies involves transaction exposure.

Accepted Answer

A) True 
 B)False

Question 11

Applying the international Fisher effect,if the interest rate in Brazil is 9 percent and in Japan is 6 percent,we would expect the value of the Brazilian real to:

Accepted Answer

A) appreciate by 3 percent against the Japanese yen. 
B) depreciate by 3 percent against the Japanese yen. 
C) appreciate by 1.5 percent against the Japanese yen. 
D) depreciate by 1.5 percent against the Japanese yen. 
A) appreciate by 3 percent against the Japanese yen. 
B) depreciate by 3 percent against the Japanese yen. 
C) appreciate by 1.5 percent against the Japanese yen. 
D) depreciate by 1.5 percent against the Japanese yen.

Question 12

Assume that the interest rate on borrowings in Country A is 2 percent and that on bank deposits in Country B is 7.5 percent.A carry trade in this scenario would be to:

Accepted Answer

A) borrow in Country B's currency, then convert the money into Country A's currency and deposit it in a bank in Country A. 
B) borrow in Country A's currency, and invest in stocks with good growth potential in Country A. 
C) borrow in Country A's currency, then convert the money into Country B's currency and deposit it in a bank in Country B. 
D) invest in bank deposits of Country B and reinvest the earnings in Country A. 
A) borrow in Country B's currency, then convert the money into Country A's currency and deposit it in a bank in Country A. 
B) borrow in Country A's currency, and invest in stocks with good growth potential in Country A. 
C) borrow in Country A's currency, then convert the money into Country B's currency and deposit it in a bank in Country B. 
D) invest in bank deposits of Country B and reinvest the earnings in Country A.

Question 13

Assume that current dollar/yen spot exchange rate is $1 = $\times$110.If the 30-day forward exchange rate for converting dollars into yen is $1 = $\times$105,we say the dollar is selling at a discount on the 30-day forward market.

Accepted Answer

A) True 
 B)False

Question 14

_____ refers to adverse consequences of unpredictable changes in exchange rates.

Accepted Answer

A) Systemic risk 
B) Foreign exchange risk 
C) Exchange control 
D) Liquidity risk 
A) Systemic risk 
B) Foreign exchange risk 
C) Exchange control 
D) Liquidity risk

Question 15

International businesses have four main uses of foreign exchange markets.Describe them.

Accepted Answer

International businesses have four main

Question 16

Relative monetary growth,relative inflation rates,and nominal interest rate differentials are all moderately good predictors of long-run changes in exchange rates.

Accepted Answer

A) True 
 B)False

Question 17

For most major currencies,forward exchange rates are usually quoted for 1 year,2 years,and 3 years into the future.

Accepted Answer

A) True 
 B)False

Question 18

What is the Fisher effect?

Accepted Answer

Economic theory tells us that interest r

Question 19

Studies indicate that the PPP theory seems to best predict exchange rate changes for countries with:

Accepted Answer

A) appreciating currencies. 
B) stable currencies. 
C) underdeveloped capital markets. 
D) small differentials in inflation rates. 
A) appreciating currencies. 
B) stable currencies. 
C) underdeveloped capital markets. 
D) small differentials in inflation rates.

Question 20

Economic exposure is distinct from transaction exposure,which is concerned with the effect of exchange rate changes on individual transactions,most of which are short-term affairs that will be executed within a few weeks or months.

Accepted Answer

A) True 
 B)False

Which of the following occurs when a government increases money supply?

A currency is said to be _____ when only nonresidents may convert it into a foreign currency without any limitations.

Why has the newsmagazine The Economist selected McDonald's Big Mac as a proxy for a "basket of goods" in publishing its own version of the PPP theorem?

The integration of financial centers implies there can be no significant difference in exchange rates quoted in the foreign exchange trading centers.

Differentiate between a lead strategy and a lag strategy.

Which of the following analysis is based on the premise that there are analyzable market trends and waves and that previous trends and waves can be used to predict future trends and waves?

Capital flight is most likely to occur when the value of the domestic currency depreciates because of deflation.

Dominant enterprises in an industry may be able to exercise a degree of pricing power,setting different prices in different markets to reflect varying demand conditions.This is referred to as:

The _____ is the rate at which one currency is converted into another.

Borrowing or lending of funds in foreign currencies involves transaction exposure.

Applying the international Fisher effect,if the interest rate in Brazil is 9 percent and in Japan is 6 percent,we would expect the value of the Brazilian real to:

Assume that the interest rate on borrowings in Country A is 2 percent and that on bank deposits in Country B is 7.5 percent.A carry trade in this scenario would be to:

Assume that current dollar/yen spot exchange rate is $1 = $\times$ 110.If the 30-day forward exchange rate for converting dollars into yen is $1 = $\times$ 105,we say the dollar is selling at a discount on the 30-day forward market.

_____ refers to adverse consequences of unpredictable changes in exchange rates.

International businesses have four main uses of foreign exchange markets.Describe them.

Relative monetary growth,relative inflation rates,and nominal interest rate differentials are all moderately good predictors of long-run changes in exchange rates.

For most major currencies,forward exchange rates are usually quoted for 1 year,2 years,and 3 years into the future.

What is the Fisher effect?

Studies indicate that the PPP theory seems to best predict exchange rate changes for countries with:

Economic exposure is distinct from transaction exposure,which is concerned with the effect of exchange rate changes on individual transactions,most of which are short-term affairs that will be executed within a few weeks or months.

Globalization

National Differences in Political Economy

Differences in Culture

Ethics in International Business

International Trade Theory

The Political Economy of International Trade

Foreign Direct Investment

Regional Economic Integration

The International Monetary System

The Strategy of International Business

Entering Foreign Markets

Exporting,Importing,and Countertrade

Global Production,Outsourcing,and Logistics

Global Marketing and RD

Global Human Resource Management

Filters

Exam 9: The Foreign Exchange Market

Which of the following occurs when a government increases money supply?

A currency is said to be _____ when only nonresidents may convert it into a foreign currency without any limitations.

Why has the newsmagazine The Economist selected McDonald's Big Mac as a proxy for a "basket of goods" in publishing its own version of the PPP theorem?

The integration of financial centers implies there can be no significant difference in exchange rates quoted in the foreign exchange trading centers.

Differentiate between a lead strategy and a lag strategy.

Which of the following analysis is based on the premise that there are analyzable market trends and waves and that previous trends and waves can be used to predict future trends and waves?

Capital flight is most likely to occur when the value of the domestic currency depreciates because of deflation.

Dominant enterprises in an industry may be able to exercise a degree of pricing power,setting different prices in different markets to reflect varying demand conditions.This is referred to as:

The _____ is the rate at which one currency is converted into another.

Borrowing or lending of funds in foreign currencies involves transaction exposure.

Applying the international Fisher effect,if the interest rate in Brazil is 9 percent and in Japan is 6 percent,we would expect the value of the Brazilian real to:

Assume that the interest rate on borrowings in Country A is 2 percent and that on bank deposits in Country B is 7.5 percent.A carry trade in this scenario would be to:

Assume that current dollar/yen spot exchange rate is $1 = ×\times× 110.If the 30-day forward exchange rate for converting dollars into yen is $1 = ×\times× 105,we say the dollar is selling at a discount on the 30-day forward market.

_____ refers to adverse consequences of unpredictable changes in exchange rates.

International businesses have four main uses of foreign exchange markets.Describe them.

Relative monetary growth,relative inflation rates,and nominal interest rate differentials are all moderately good predictors of long-run changes in exchange rates.

For most major currencies,forward exchange rates are usually quoted for 1 year,2 years,and 3 years into the future.

What is the Fisher effect?

Studies indicate that the PPP theory seems to best predict exchange rate changes for countries with:

Economic exposure is distinct from transaction exposure,which is concerned with the effect of exchange rate changes on individual transactions,most of which are short-term affairs that will be executed within a few weeks or months.

Globalization

National Differences in Political Economy

Differences in Culture

Ethics in International Business

International Trade Theory

The Political Economy of International Trade

Foreign Direct Investment

Regional Economic Integration

The International Monetary System

The Strategy of International Business

Entering Foreign Markets

Exporting,Importing,and Countertrade

Global Production,Outsourcing,and Logistics

Global Marketing and RD

Global Human Resource Management

Filters

Assume that current dollar/yen spot exchange rate is $1 = $\times$ 110.If the 30-day forward exchange rate for converting dollars into yen is $1 = $\times$ 105,we say the dollar is selling at a discount on the 30-day forward market.