Question 1

A(n)_____ is one in which prices do not reflect all available information.

Accepted Answer

A) inefficient market 
B) primary market 
C) fully priced market 
D) inconsistent market 
A) inefficient market 
B) primary market 
C) fully priced market 
D) inconsistent market

Question 2

Which of the following occurs when the quantity of money in circulation rises faster than the stock of goods and services?

Accepted Answer

A) Liquidity crunch 
B) Deflation 
C) Trade surplus 
D) Inflation 
A) Liquidity crunch 
B) Deflation 
C) Trade surplus 
D) Inflation

Question 3

Assume that the exchange rate between the euro and the dollar is €1 = $1.20.According to the law of one price,a camera that retails for $300 in New York should sell for _____in Germany.

Accepted Answer

A) €320 
B) €300 
C) €250 
D) €360 
A) €320 
B) €300 
C) €250 
D) €360

Question 4

How does an increase in a country's money supply affect its currency exchange rate?

Accepted Answer

A) It overheats the economy thereby reducing the production levels in the economy. 
B) It changes the relative demand and supply conditions in the foreign exchange market. 
C) It reduces the rate of inflation thus leading to an appreciation of the currency. 
D) It leads to increased lending by banks thereby resulting in more savings. 
A) It overheats the economy thereby reducing the production levels in the economy. 
B) It changes the relative demand and supply conditions in the foreign exchange market. 
C) It reduces the rate of inflation thus leading to an appreciation of the currency. 
D) It leads to increased lending by banks thereby resulting in more savings.

Question 5

Which of the following is an example of transaction exposure?

Accepted Answer

A) Obligations for the purchase of goods at previously agreed prices 
B) Borrowing of funds in domestic currency 
C) Impact of currency exchange rate changes on the reported financial statements of a company 
D) Long-run effect of changes in exchange rates on future prices,sales,and costs 
A) Obligations for the purchase of goods at previously agreed prices 
B) Borrowing of funds in domestic currency 
C) Impact of currency exchange rate changes on the reported financial statements of a company 
D) Long-run effect of changes in exchange rates on future prices,sales,and costs

Question 6

_____ refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.

Accepted Answer

A) Countertrade 
B) Price discrimination 
C) Cartelization 
D) Dumping 
A) Countertrade 
B) Price discrimination 
C) Cartelization 
D) Dumping

Question 7

Identify a common way in which a market dominating firm that practices price discrimination prevents the arbitrage of its products across various markets.

Accepted Answer

A) Pricing its products identically despite huge differences in demand across different markets 
B) Differentiating otherwise identical products among nations along some line,such as design or packaging 
C) Adopting a pricing strategy matching what competitors charge in each of the different national markets 
D) Limiting sales of its products to only a few nations 
A) Pricing its products identically despite huge differences in demand across different markets 
B) Differentiating otherwise identical products among nations along some line,such as design or packaging 
C) Adopting a pricing strategy matching what competitors charge in each of the different national markets 
D) Limiting sales of its products to only a few nations

Question 8

Technical analysis does not rely on a consideration of economic fundamentals.

Accepted Answer

A) True 
 B)False

Question 9

The _____ states that for any two countries,the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.

Accepted Answer

A) carry trade effect 
B) law of one price 
C) international Fisher effect 
D) theory of comparative advantage 
A) carry trade effect 
B) law of one price 
C) international Fisher effect 
D) theory of comparative advantage

Question 10

A _____ is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

Accepted Answer

A) currency barter 
B) currency exercise 
C) currency option 
D) currency swap 
A) currency barter 
B) currency exercise 
C) currency option 
D) currency swap

Question 11

Describe the factors that help explain the failure of PPP theory to predict exchange rates accurately.

Accepted Answer

Several factors explain the failure of P

Question 12

Leading and lagging involves accelerating payments from weak-currency to strong-currency countries and delaying inflows from strong-currency to weak-currency countries.

Accepted Answer

A) True 
 B)False

Question 13

Foreign exchange risk refers to the risk of not getting paid for a product that is exported from one country to another.

Accepted Answer

A) True 
 B)False

Question 14

Why do spot exchange rates and forward rates differ?

Accepted Answer

A) Because forward rates reflect the expectations of the foreign exchange market about future currency movements 
B) Because of the imbalance between demand and supply for the currency in the spot exchange market 
C) Because of the volatility inherent in foreign exchange markets 
D) Because forward rates,by definition,should sell either at a premium or a discount 
A) Because forward rates reflect the expectations of the foreign exchange market about future currency movements 
B) Because of the imbalance between demand and supply for the currency in the spot exchange market 
C) Because of the volatility inherent in foreign exchange markets 
D) Because forward rates,by definition,should sell either at a premium or a discount

Question 15

How does an increase in the money supply in an economy lead to inflation?

Accepted Answer

A government increasing the money supply

Question 16

In 2002-2007,the euro rose in value against the dollar.This boosted the dollar profits of American multinationals with significant operations in Europe.Which of the following is this an example of?

Accepted Answer

A) Economic exposure 
B) Transaction exposure 
C) Translation exposure 
D) Income exposure 
A) Economic exposure 
B) Transaction exposure 
C) Translation exposure 
D) Income exposure

Question 17

You exchanged $1,000 to $\times$105,000 for a trip to Japan.During your stay,you spent $\times$50,000.Also,during this period the dollar weakened against the yen to 100 to a dollar.On your return,you went to the bank to exchange the remaining yen.How many dollars did you spend on the trip?

Accepted Answer

A) $550 
B) $523 
C) $450 
D) $600 
A) $550 
B) $523 
C) $450 
D) $600

Question 18

Most economic theories of exchange rate movements agree that three factors have an important impact on future exchange rate movements in a country's currency.Which of the following is NOT one of these factors?

Accepted Answer

A) The country's price inflation 
B) The country's interest rate 
C) Market psychology 
D) The country's population 
A) The country's price inflation 
B) The country's interest rate 
C) Market psychology 
D) The country's population

Question 19

Countertrade can make most sense when a country's currency is:

Accepted Answer

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

Question 20

The rapid rise in the value of the dollar on the foreign exchange market in the 1990s hurt the price competitiveness of many U.S.producers in world markets.U.S.manufacturers that relied heavily on exports saw their export volume and world market share decline.This is an example of:

Accepted Answer

A) income exposure. 
B) transaction exposure. 
C) economic exposure. 
D) translation exposure. 
A) income exposure. 
B) transaction exposure. 
C) economic exposure. 
D) translation exposure.

A(n)_____ is one in which prices do not reflect all available information.

Which of the following occurs when the quantity of money in circulation rises faster than the stock of goods and services?

Assume that the exchange rate between the euro and the dollar is €1 = $1.20.According to the law of one price,a camera that retails for $300 in New York should sell for _____in Germany.

How does an increase in a country's money supply affect its currency exchange rate?

Which of the following is an example of transaction exposure?

_____ refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.

Identify a common way in which a market dominating firm that practices price discrimination prevents the arbitrage of its products across various markets.

Technical analysis does not rely on a consideration of economic fundamentals.

The _____ states that for any two countries,the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.

A _____ is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

Describe the factors that help explain the failure of PPP theory to predict exchange rates accurately.

Leading and lagging involves accelerating payments from weak-currency to strong-currency countries and delaying inflows from strong-currency to weak-currency countries.

Foreign exchange risk refers to the risk of not getting paid for a product that is exported from one country to another.

Why do spot exchange rates and forward rates differ?

How does an increase in the money supply in an economy lead to inflation?

In 2002-2007,the euro rose in value against the dollar.This boosted the dollar profits of American multinationals with significant operations in Europe.Which of the following is this an example of?

You exchanged $1,000 to $\times$ 105,000 for a trip to Japan.During your stay,you spent $\times$ 50,000.Also,during this period the dollar weakened against the yen to 100 to a dollar.On your return,you went to the bank to exchange the remaining yen.How many dollars did you spend on the trip?

Most economic theories of exchange rate movements agree that three factors have an important impact on future exchange rate movements in a country's currency.Which of the following is NOT one of these factors?

Countertrade can make most sense when a country's currency is:

The rapid rise in the value of the dollar on the foreign exchange market in the 1990s hurt the price competitiveness of many U.S.producers in world markets.U.S.manufacturers that relied heavily on exports saw their export volume and world market share decline.This is an example of:

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

A(n)_____ is one in which prices do not reflect all available information.

Which of the following occurs when the quantity of money in circulation rises faster than the stock of goods and services?

Assume that the exchange rate between the euro and the dollar is €1 = $1.20.According to the law of one price,a camera that retails for $300 in New York should sell for _____in Germany.

How does an increase in a country's money supply affect its currency exchange rate?

Which of the following is an example of transaction exposure?

_____ refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.

Identify a common way in which a market dominating firm that practices price discrimination prevents the arbitrage of its products across various markets.

Technical analysis does not rely on a consideration of economic fundamentals.

The _____ states that for any two countries,the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.

A _____ is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

Describe the factors that help explain the failure of PPP theory to predict exchange rates accurately.

Leading and lagging involves accelerating payments from weak-currency to strong-currency countries and delaying inflows from strong-currency to weak-currency countries.

Foreign exchange risk refers to the risk of not getting paid for a product that is exported from one country to another.

Why do spot exchange rates and forward rates differ?

How does an increase in the money supply in an economy lead to inflation?

In 2002-2007,the euro rose in value against the dollar.This boosted the dollar profits of American multinationals with significant operations in Europe.Which of the following is this an example of?

You exchanged $1,000 to ×\times× 105,000 for a trip to Japan.During your stay,you spent ×\times× 50,000.Also,during this period the dollar weakened against the yen to 100 to a dollar.On your return,you went to the bank to exchange the remaining yen.How many dollars did you spend on the trip?

Most economic theories of exchange rate movements agree that three factors have an important impact on future exchange rate movements in a country's currency.Which of the following is NOT one of these factors?

Countertrade can make most sense when a country's currency is:

The rapid rise in the value of the dollar on the foreign exchange market in the 1990s hurt the price competitiveness of many U.S.producers in world markets.U.S.manufacturers that relied heavily on exports saw their export volume and world market share decline.This is an example of:

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

You exchanged $1,000 to $\times$ 105,000 for a trip to Japan.During your stay,you spent $\times$ 50,000.Also,during this period the dollar weakened against the yen to 100 to a dollar.On your return,you went to the bank to exchange the remaining yen.How many dollars did you spend on the trip?