Question 1

Currency exchange controls are found most frequently in:

Accepted Answer

A)  developing countries. 
B)  developed countries. 
C)  countries with pegged exchange rates. 
D)  nondemocratic countries.

Question 2

What are currency exchange controls, why are they used, and how might they influence the international manager located in an exchange-controlled environment?

Accepted Answer

The answer of What are currency exchange controls, why are...

Question 3

Monetary and fiscal policies:

Accepted Answer

A)  have nothing to do with exchange rate movement. 
B)  influence interest rates and taxation, and so may influence exchange rates. 
C)  have no predictable influence on inflation. 
D)  have no influence on trade patterns.

Question 4

In order to strengthen the U.S. dollar, the Federal Reserve might sell yen and buy dollars, in which case the yen functions as:

Accepted Answer

A)  a stronger currency than the dollar. 
B)  an intervention currency. 
C)  an arbitrage currency. 
D)  none of the above.

Question 5

As a result of Bretton Woods and the dollar's use as a proxy for gold, the United States ran up a balance-of-payments deficit of around $56 billion, which led to the United States going off the gold exchange standard in 1971.

Accepted Answer

A) True 
 B)False

Question 6

Exchange rate forecasting is:

Accepted Answer

A)  important because exchange rates influence all aspects of business. 
B)  important because markets depend on solid information. 
C)  unimportant because exchange rate forecasting does not have a theoretical model. 
D)  unimportant because exchange rate movements do not impact international transactions.

Question 7

The spot rate is the rate for exchange within two days in the currency market.

Accepted Answer

A) True 
 B)False

Question 8

De Gaulle pushed Nixon to close the gold window at the Treasury, and this one action moved the IMF toward a floating exchange rate system.

Accepted Answer

A) True 
 B)False

Question 9

One attribute of the U.S. tariff schedule is:

Accepted Answer

A)  that it is printed in both Arabic and Hebrew. 
B)  how specific it is. 
C)  that its categories are quite general and easy to apply. 
D)  that its harmonized version can be accessed via cell phone and iPad.

Question 10

If freely floating currencies are allowed to fluctuate against one another, at times the fluctuations might be quite large.

Accepted Answer

A) True 
 B)False

Question 11

When the law of one price is applied to interest rates, it suggests that:

Accepted Answer

A)  interest rates do not differ much across national borders. 
B)  inflation is not affected by interest rates. 
C)  inflation and interest rates do not follow the law of one price. 
D)  varying interest rates take into account anticipated differences in inflation rates.

Question 12

A purchase of foreign goods from the United States (requiring importing) will:

Accepted Answer

A)  be recorded in the BOP as an asset in the current account. 
B)  be recorded in the BOP as a debit in the current account. 
C)  have no record in the BOP because the purchase is made in the United States. 
D)  be recorded in the BOP as a liability in the foreign transfer account.

Question 13

A vehicle currency is a currency:

Accepted Answer

A)  used to trade in the transportation sector and is usually the dollar, euro, or yen. 
B)  whose value lies in its function in transfer pricing. 
C)  specifically used in arbitrage deals as a trading medium only. 
D)  used for international trade or investment.

Question 14

The Bretton Woods meeting in 1944 established a fixed-rate exchange system among Allied governments that was imposed on the Axis governments.

Accepted Answer

A) True 
 B)False

Question 15

The SDR is:

Accepted Answer

A)  a special deposit for corporate reimbursement. 
B)  special drawing rights, an international reserve asset. 
C)  a special deficit refund, made to compensate for currency devaluation. 
D)  a paper credit issued by the Bank for International Settlements.

Question 16

Historically, gold has been used as a way for people to store value because of its:

Accepted Answer

A)  purity and scarcity. 
B)  high transportation and security costs. 
C)  lack of interest-earning ability. 
D)  all of the above.

Question 17

The Triffin paradox suggests that:

Accepted Answer

A)  reserve currencies can never run deficits. 
B)  eventually, reserve currencies will run deficits, which will lead to lack of confidence in the currency. 
C)  the more a currency is held in reserves, the stronger it is. 
D)  the U.S. dollar could never be a reserve currency.

Question 18

Sir Isaac Newton established the price of gold in 1717 and de facto put England on the gold standard.

Accepted Answer

A) True 
 B)False

Question 19

Currency exchange rate movements are well understood by economists and can be accurately forecast, which eliminates risk for the international seller operating with exposure outside the home currency.

Accepted Answer

A) True 
 B)False

Question 20

The Bank for International Settlements is like a central bank for central bankers.

Accepted Answer

A) True 
 B)False

Exam 8: The International Monetary System and Financial Forces

Currency exchange controls are found most frequently in:

What are currency exchange controls, why are they used, and how might they influence the international manager located in an exchange-controlled environment?

Monetary and fiscal policies:

In order to strengthen the U.S. dollar, the Federal Reserve might sell yen and buy dollars, in which case the yen functions as:

As a result of Bretton Woods and the dollar's use as a proxy for gold, the United States ran up a balance-of-payments deficit of around $56 billion, which led to the United States going off the gold exchange standard in 1971.

Exchange rate forecasting is:

The spot rate is the rate for exchange within two days in the currency market.

De Gaulle pushed Nixon to close the gold window at the Treasury, and this one action moved the IMF toward a floating exchange rate system.

One attribute of the U.S. tariff schedule is:

If freely floating currencies are allowed to fluctuate against one another, at times the fluctuations might be quite large.

When the law of one price is applied to interest rates, it suggests that:

A purchase of foreign goods from the United States (requiring importing) will:

A vehicle currency is a currency:

The Bretton Woods meeting in 1944 established a fixed-rate exchange system among Allied governments that was imposed on the Axis governments.

The SDR is:

Historically, gold has been used as a way for people to store value because of its:

The Triffin paradox suggests that:

Sir Isaac Newton established the price of gold in 1717 and de facto put England on the gold standard.

Currency exchange rate movements are well understood by economists and can be accurately forecast, which eliminates risk for the international seller operating with exposure outside the home currency.

The Bank for International Settlements is like a central bank for central bankers.