1) if the expected inflation in brazil in higher than the expected inflation in the u.s., and
the real interest rates are equal across countries, then we would expect the brazilian real
(brazils currency) to:
a.appreciate
b.depreciate
c.remain the same
d.depreciate and then appreciate later
2) assume that u.s. imports are contracted in foreign currency and the u.s. exports are
contracted in domestic currency. if the dollar is devalued, then the balance of trade will:
a.become more negative
b.become more positive
c.stay the same
d.not possible to answer with the given information
3) company specific risk is also known as:
a.market risk
b.systematic risk
c.non-diversifiable risk
d.nonsystematic risk
4) the exact and approximate cirp are close in value when
a.interest rates are larger
b.interest rates are smaller
c.spot rates are larger
d.spot rates are smaller
5) if the foreign exchange market is efficient, the forward exchange rate would differ
from the expected future spot exchange rate only by a(n) ________.
a.strike price
b.exposure risk
c.future spot exchange rate
d.risk premium
6) under fixed exchange rates, when a central bank increases money supply, it first
shifts the lm curve to the ______ and later shifts ______.
a.left; the lm curve to the right
b.left; the is curve to the right
c.right; the lm curve to the left
d.right; the is curve to the right
7) if the expected inflation in brazil in higher than the expected inflation in the u.s., and
the real interest rates are equal across countries, then:
a.there is a forward premium on the dollar
b.there is a forward flat on the dollar
c.there is a forward discount on the dollar
d.there is a spot discount on the dollar
8) the monetary approach in the case of a managed floating exchange rate:
a.is like that of currency boards
b.introduces variables to represent changes in fiscal policy
c.is a combination of mabp and maer
d.is not possible to model
9) the basic premise of the monetary approach is that:
a.exchange rate movements change according to uncontrolled shocks
b.holdings of international reserves should be minimized
c.any balance of payments disequilibrium is based on a monetary disequilibrium
d.peoples willingness to hold money can alter exchange rates but not the balance of
payments
10) because foreigners hold a greater claim to u.s. assets than u.s. residents to foreign
assets, u.s. is a ________.
a.net creditor
b.trade creditor
c.trade debtor
d.net debtor