Under a fixed Exchange rate system, the government bears the responsibility to ensure that the
BOP is near zero. If the sum of the current and capital accounts do not approximate zero, the
government is expected to intervene in the foreign exchange market by buying or selling official
foreign exchange reserves. If the sum of the first two accounts is greater than zero, a _____
demand for the domestic currency for foreign exchange market and _____ domestic currency
for foreign currencies or gold so as to bring the BOP back near zero
A) Surplus; sell
Under fixed exchange rate system, greater than zero will be surplus and sell in domestic
currency
B) Surplus; buy
C) Deficit; sell
D) Deficit; buy
When discussing the structure of corporate governance, the authors distinguish between and
external factors. ___ is an example of an internal factor, and ___ is an example of an external
factor
a) Equity markets, executive management
b) Debt markets, board of directors
c) Executive management; auditors
d) Auditors regulations
The U.S dollar suddenly changes in value against the euro moving from an exchange rate of
$0.8909/C to $0.8709/C. Thus, the dollar has __ by ___
a) Appreciated; 2:30%
The rate of change is = (0.8909-0.8709)/0.8909)= 2.29
b) Depreciated;2.30%
c) Appreciated; 2.24%
d) Depreciated; 2.24%
Which of the following international transactions would not be counted as a BAlance of
payments transaction?
*An American tourist purchases cheese in Milwaukee Wisconsin .
One year ago the spot rate of U.S. dollars for Canadian dollars was $1/C$1. Since that time the
rate of inflation in the U.S. has been 4% greater than that in Canada. Based on the theory of
Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars should be
approximately:
a) $0.96/C$.
b) $1/C$.
c) $1.04/C$.
d) Relative PPP provides no guide for this type of question.
This study source was downloaded by 100000828385441 from CourseHero.com on 02-26-2025 12:43:55 GMT -06:00
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, If the direct quote for a quote for a U.S investor for British pounds is $1.43/euro, then the
indirect quote for the US investor would be _____ and the direct quote for he British investor
would be ____
a. £0.699/$; £0.699/$
1/1.43 = 0.699
b. £1.43/¬£; £0.699/$
c. £0.699/$; $1.43/£
d. $0.699/¬£; £0.699/$
Of the following, which would NOT be considered a way that government interferes with
comparative advantage?
Question 4 options:
a) Tariffs
b) managerial skills
c) quotas
d) other non-tariff restrictions
When categorizing investments for the financial account component of the balance of payments
the __ is an investment where the investor has no control whereas the __ is an investment
where the investor has control over the asset.
Question 5 options:
a) direct investment; portfolio investment
b) direct investment; indirect investment
c) portfolio investment; indirect investment
d) portfolio investment; direct investment
Financial globalization has NOT resulted in:
a) continuing imbalances of balance of payments.
b) an increase in quantity and speed in the flow of capital across the world.
c) capital markets less open and a decrease in the availability of capital for many
organizations.
d) uniform ways of ownership, control, and governance across the world.
You have been hired as a consultant to the central bank for a country that has for many years
suffered from repeated currency crises and depends heavily on the U.S. financial and product
markets. Which of the following policies would have the greatest effectiveness for reducing
currency volatility of the client country with the United States?
Question 7 options:
a) dollarization
b) an exchange rate pegged to the U.S. dollar
c) an exchange rate with a fixed price per ounce of gold
d) an internationally floating exchange rate
Which of the following is NOT an item to be considered in BOP calculations?
This study source was downloaded by 100000828385441 from CourseHero.com on 02-26-2025 12:43:55 GMT -06:00
https://www.coursehero.com/file/86866522/FIN-621-midterm-test-bank-1docx/
BOP is near zero. If the sum of the current and capital accounts do not approximate zero, the
government is expected to intervene in the foreign exchange market by buying or selling official
foreign exchange reserves. If the sum of the first two accounts is greater than zero, a _____
demand for the domestic currency for foreign exchange market and _____ domestic currency
for foreign currencies or gold so as to bring the BOP back near zero
A) Surplus; sell
Under fixed exchange rate system, greater than zero will be surplus and sell in domestic
currency
B) Surplus; buy
C) Deficit; sell
D) Deficit; buy
When discussing the structure of corporate governance, the authors distinguish between and
external factors. ___ is an example of an internal factor, and ___ is an example of an external
factor
a) Equity markets, executive management
b) Debt markets, board of directors
c) Executive management; auditors
d) Auditors regulations
The U.S dollar suddenly changes in value against the euro moving from an exchange rate of
$0.8909/C to $0.8709/C. Thus, the dollar has __ by ___
a) Appreciated; 2:30%
The rate of change is = (0.8909-0.8709)/0.8909)= 2.29
b) Depreciated;2.30%
c) Appreciated; 2.24%
d) Depreciated; 2.24%
Which of the following international transactions would not be counted as a BAlance of
payments transaction?
*An American tourist purchases cheese in Milwaukee Wisconsin .
One year ago the spot rate of U.S. dollars for Canadian dollars was $1/C$1. Since that time the
rate of inflation in the U.S. has been 4% greater than that in Canada. Based on the theory of
Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars should be
approximately:
a) $0.96/C$.
b) $1/C$.
c) $1.04/C$.
d) Relative PPP provides no guide for this type of question.
This study source was downloaded by 100000828385441 from CourseHero.com on 02-26-2025 12:43:55 GMT -06:00
https://www.coursehero.com/file/86866522/FIN-621-midterm-test-bank-1docx/
, If the direct quote for a quote for a U.S investor for British pounds is $1.43/euro, then the
indirect quote for the US investor would be _____ and the direct quote for he British investor
would be ____
a. £0.699/$; £0.699/$
1/1.43 = 0.699
b. £1.43/¬£; £0.699/$
c. £0.699/$; $1.43/£
d. $0.699/¬£; £0.699/$
Of the following, which would NOT be considered a way that government interferes with
comparative advantage?
Question 4 options:
a) Tariffs
b) managerial skills
c) quotas
d) other non-tariff restrictions
When categorizing investments for the financial account component of the balance of payments
the __ is an investment where the investor has no control whereas the __ is an investment
where the investor has control over the asset.
Question 5 options:
a) direct investment; portfolio investment
b) direct investment; indirect investment
c) portfolio investment; indirect investment
d) portfolio investment; direct investment
Financial globalization has NOT resulted in:
a) continuing imbalances of balance of payments.
b) an increase in quantity and speed in the flow of capital across the world.
c) capital markets less open and a decrease in the availability of capital for many
organizations.
d) uniform ways of ownership, control, and governance across the world.
You have been hired as a consultant to the central bank for a country that has for many years
suffered from repeated currency crises and depends heavily on the U.S. financial and product
markets. Which of the following policies would have the greatest effectiveness for reducing
currency volatility of the client country with the United States?
Question 7 options:
a) dollarization
b) an exchange rate pegged to the U.S. dollar
c) an exchange rate with a fixed price per ounce of gold
d) an internationally floating exchange rate
Which of the following is NOT an item to be considered in BOP calculations?
This study source was downloaded by 100000828385441 from CourseHero.com on 02-26-2025 12:43:55 GMT -06:00
https://www.coursehero.com/file/86866522/FIN-621-midterm-test-bank-1docx/
