International Economics Questions
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Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market?A.minimizing the risks of exchange rate changesB.the transfer of purchasing power between countriesC.obtaining or providing credit for international trade transactionsD.All of the above were identified as functions of the foreign exchange market.
The countries that use the euro as their currency have:A.agreed to use a single currency (exchange rate stability), allow individual control of their own money supply (monetary independence), but give up the free movement of capital in and out of their economies (financial integration).B.gained control over their own money supply (monetary independence), allowed the free movement of capital in and out of their economies (financial integration), but give up exchange rate stability.C.agreed to use a single currency (exchange rate stability), allow the free movement of capital in and out of their economies (financial integration), but give up individual control of their own money supply (monetary independence).D.none of the above
A/An ________ is an agreement between a buyer and seller that a fixed amount of one currency will be delivered at a specified rate for some other currency.A.import/export exchangeB.foreign exchange transaction.C.Eurodollar transactionD.interbank market transaction
Which of the following factors make it difficult for emerging market economies to choose a specific currency regime?A.weak fiscal, financial, and monetary institutionsB.the emerging market's vulnerability to sudden stoppages of outside capital flowsC.the tendency for commerce to allow currency substitution and the denomination of liabilities in dollarsD.all of the above
The ability of a country to profit from its ability to print money is known as:A.inflation.B.profiteering.C.dollarization.D.seigniorage.
Which of the following is NOT considered a currency degree of internationalization?A.with the use of the currency for international investmentsB.when a currency becomes the reporting currency—the currency in which companies report their financial statementsC.when a currency takes on a role as an anchor currencyD.when an international currency becomes readily accessible for trade
The International Monetary Fund (IMF):A.in recent years has provided large loans to Russia, South Korea, and Brazil.B.aids countries with balance of payment and exchange rate problems.C.was created as a result of the Bretton Woods Agreement.D.is all of the above.
The post WWII international monetary agreement that was developed in 1944 is known as the:A.League of Nations.B.Yalta Agreement.C.Bretton Woods Agreement.D.United Nations.
Which of the following is NOT an attribute of the "ideal" currency?A.exchange rate stabilityB.full financial integrationC.monetary independenceD.All are attributes of an ideal currency.
According to the terminology associated with changes in currency values, which of the following choices is the case when a currency's value relative to other currencies is changed by a government?A.depreciation and revaluationB.devaluation and appreciationC.devaluation and revaluationD.depreciation and appreciation
Among IMF member countries since 2010, the dominating exchange rate regime has been:A.residual agreement.B.soft peg.C.floating arrangements.D.hard peg.
A small economy country whose GDP is heavily dependent on trade with the United States could use a(n) ________ exchange rate regime to minimize the risk to their economy that could arise due to unfavorable changes in the exchange rate.A.pegged exchange rate with the United StatesB.pegged exchange rate with the EuroC.managed floatD.independent floating
Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, a country that has given up their own sovereignty over monetary policy is considered to have:A.hard pegs.B.soft pegs.C.floating arrangements.D.a residual agreement.
The theory that suggests specialization by country can increase worldwide production is:A.the international Fisher effect.B.the theory of working capital management.C.the theory of foreign direct investment.D.the theory of comparative advantage.
Interest spreads in the eurocurrency market are small for many reasons EXCEPT:A.Eurocurrency loans are secured loans.B.Eurocurrency deposits and loans are made in amounts of $500,000 or more on an unsecured basis.C.The eurocurrency is a wholesale market.D.Borrowers are usually large corporations or government entities.
The reference rate of interest in the eurocurrency market is the:A.Treasury rate.B.London Interbank Offered Rate.C.Prima rate.D.Federal funds rate.
Between 1998 and the end of 2000, the U.S. ran a large trade deficit; this should have caused the dollar to depreciate against foreign currencies but instead the dollar appreciated. The main reason for this is:
The key factor attracting both depositors and borrowers to the Eurocurrency loan market is the narrow interest rate spread within that market.A) TrueB) False
Comparative advantage is one of the underlying principles driving the growth of global business.A) TrueB) False
Financial globalization has NOT resulted in:A.an increase in quantity and speed in the flow of capital across the world.B.capital markets more open and an increase in the availability of capital for many organizations.C.continuing imbalances of balance of payments.D.an increase in the flow of capital into and out of industrialized markets.