ECN 306 Exam 3 well answered 100%
correct already passed
Professor Bhagwati's phrase is intended to convey the view that a policy of free international
capital mobility may not be socially optimal in contrast to a policy of free trade - correct answer
✔✔True
Two nations are unable to smooth consumption across two states of nature because they lack a
global capital market. - correct answer ✔✔Average consumption 50 and the variance of
consumption 0
What applies to Brady Bonds? - correct answer ✔✔They helped resolve the Third World debt
crisis precipitated by Mexico's default in 1982
What can lead to international financial crises? - correct answer ✔✔Waves of overborrowing
and overlending, failure to hedge foreign currency liabilities, volatile global short-term lending,
contagion
What policy is likely to make financial crises less likely to occur? - correct answer ✔✔A nation
strives to follow sound macroeconomic policies
What is not correct? - correct answer ✔✔The crisis in Thailand, through a process of contagion,
spread to other countries
Knowing that IMF rescue packages are available leads nations to engage in riskier behavior
when borrowing, known as: - correct answer ✔✔Moral hazard
, What happens to U.S. GNP when capital is permitted to flow freely? - correct answer ✔✔U.S.
GNP rises by area d+e+f
What happens to U.S. GDP when capital is permitted to flow freely? - correct answer ✔✔U.S.
GNP rises by g+h+a+b+c+d+e+f
What happens to World GDP when capital is permitted to flow freely? - correct answer
✔✔World GDP rises by area a+b+c+d+e+f
An investment exposed to exchange rate risk is: - correct answer ✔✔Uncovered international
investment
Concerning the covering of exchange market risks, assuming that depreciation of the domestic
currency is anticipated, one can say that there is an incentive for: - correct answer
✔✔Importers to rush to cover their future needs
The percent difference between the current forward exchange rate value of a currency and its
spot current value is the: - correct answer ✔✔Forward premium
A small U.S. firm has sold experimental components to a Japanese firm and it will receive
payment of 1 million yen in 60 days. What is an option for hedging exchange rate risk? - correct
answer ✔✔The company can use the forward market, the company can borrow an amount in
Japan
What means committing oneself to an uncertain future value of one's net worth in terms of
home currency? - correct answer ✔✔Speculating
Assume you are a Chinese exporter and expect to receive $250,000 at the end of 60 days. You
can remove the risk of loss due to devaluation of the dollar by: - correct answer ✔✔Selling
dollars in the forward market for 60-day delivery
correct already passed
Professor Bhagwati's phrase is intended to convey the view that a policy of free international
capital mobility may not be socially optimal in contrast to a policy of free trade - correct answer
✔✔True
Two nations are unable to smooth consumption across two states of nature because they lack a
global capital market. - correct answer ✔✔Average consumption 50 and the variance of
consumption 0
What applies to Brady Bonds? - correct answer ✔✔They helped resolve the Third World debt
crisis precipitated by Mexico's default in 1982
What can lead to international financial crises? - correct answer ✔✔Waves of overborrowing
and overlending, failure to hedge foreign currency liabilities, volatile global short-term lending,
contagion
What policy is likely to make financial crises less likely to occur? - correct answer ✔✔A nation
strives to follow sound macroeconomic policies
What is not correct? - correct answer ✔✔The crisis in Thailand, through a process of contagion,
spread to other countries
Knowing that IMF rescue packages are available leads nations to engage in riskier behavior
when borrowing, known as: - correct answer ✔✔Moral hazard
, What happens to U.S. GNP when capital is permitted to flow freely? - correct answer ✔✔U.S.
GNP rises by area d+e+f
What happens to U.S. GDP when capital is permitted to flow freely? - correct answer ✔✔U.S.
GNP rises by g+h+a+b+c+d+e+f
What happens to World GDP when capital is permitted to flow freely? - correct answer
✔✔World GDP rises by area a+b+c+d+e+f
An investment exposed to exchange rate risk is: - correct answer ✔✔Uncovered international
investment
Concerning the covering of exchange market risks, assuming that depreciation of the domestic
currency is anticipated, one can say that there is an incentive for: - correct answer
✔✔Importers to rush to cover their future needs
The percent difference between the current forward exchange rate value of a currency and its
spot current value is the: - correct answer ✔✔Forward premium
A small U.S. firm has sold experimental components to a Japanese firm and it will receive
payment of 1 million yen in 60 days. What is an option for hedging exchange rate risk? - correct
answer ✔✔The company can use the forward market, the company can borrow an amount in
Japan
What means committing oneself to an uncertain future value of one's net worth in terms of
home currency? - correct answer ✔✔Speculating
Assume you are a Chinese exporter and expect to receive $250,000 at the end of 60 days. You
can remove the risk of loss due to devaluation of the dollar by: - correct answer ✔✔Selling
dollars in the forward market for 60-day delivery
