International Money and Business summary Questions and Answers

What are the differences between a floating exchange and a fixed exchange rate policy? - -1.) 1. Floating Exchange Rate Policy: a government policy to let demand and supply conditions determine exchange rates 2. Fixed Exchange Rate Policy: a government policy to set the exchange rate of a currency relative to other currencies -What concepts must a savvy manager understand about currencies to do international business successfully? - -1.) Fostering foreign exchange 2.) Risk analysis of any country much include an analysis of its currency risks 3.) a currency risk management strategy is necessary, through hedging or invoicing one's currency. -Name and Describe three ways non-financial companies can cope with currency risks - -1.) Invoicing in their own currencies: by invoicing in dollars, many US firms have enjoyed protection from unfavorable foreign exchange movements. 2.) Currency heading: trying to predict currency movements- which is very risky. 3.) Strategic Hedging: spreading out activitie in a number of countries in different currency zones to offset any currency losses in one region through Gaines in other regions.