1) suppose the central bank increases the money supply. then:
a.the is curve shifts right
b.the is curve shifts left
c.the lm curve shifts right
d.the lm curve shifts left
2) suppose that the one-year u.s. interest rate is 8% and the equivalent one-year india
interest rate is 12%. according to covered interest parity, there is:
a.forward discount on dollar
b.forward premium on dollar
c.forward premium for indian rupee
d.forward flat on dollar
3) a stock market in which foreign investors are not allowed to buy domestic stocks and
domestic investors are not allowed to buy foreign stocks is called a(n):
a.international market
b.segmented market
c.domestic market
d.globalized market
4) which of the following exchange rate systems is the least flexible?
a.free floating
b.managed floating
c.currency board
d.fixed peg arrangement
5) figure 13-2
refer to figure 13-2. starting from an equilibrium point a, if the is curve shifts to the left
to is2,
a.there will be official settlement deficit which pressures the domestic currency to
depreciate
b.there will be official settlement deficit which pressures the domestic currency to
appreciate
c.there will be official settlement surplus which pressures the domestic currency to
depreciate
d.there will be official settlement surplus which pressures the domestic currency to
appreciate
6) rather than directly issuing stock in the u.s. to obtain equity funds, foreign
corporations can issue ___________, which are certificates representing underlying
bundles of stock.
a.american depositary receipts
b.special drawing rights
c.mortgage backed securities
d.put option
7) suppose that the covered interest parity holds. if real interest rates are equal in two
countries, then:
a.the interest rate differential will equal to expected inflation rate differential
b.the interest rate differential will equal to the forward premium or discount between
two currencies
c.the expected inflation rate differential will equal to the forward premium or discount
between two currencies
d.all of the above are correct
8) which of the following best describes translation exposure?
a.operating banks in a remote location with an uncommon language
b.accounting exposure from translating interest rates from different regions
c.translating financial statements from one currency to another
d.creating more than one offshore branch
9) the is curve represents the __________, while the lm curve represents the
_________.
a. foreign exchange market; money market
b. foreign exchange market; bond market
c. goods and services market; foreign exchange market
d. goods and services market; money market
10) after adjusting for inflation differentials between two countries, the exchange rate is
referred to as:
a.predicted exchange rate
b.real exchange rate
c.nominal exchange rate
d.inflation exchange rate
11) if multinational businesses want managers of foreign subsidiaries to be involved in
international financing issues, then subsidiary profits should be measured in:
a.the foreign currency
b.the domestic currency
c.u.s. dollars only
d.swiss francs only
12) sterilized intervention is the policy that:
a.targets a domestic inflation rate within a certain range of values
b.attempts to influence exchange rate movements with official statements on the
governments preferred rate, without taking any direct action in the financial markets
c.coordinates monetary and fiscal policies with ones trading partners so as to achieve
particular international economic outcomes
d.offsets private capital movements with changes in the asset portfolio of the central
bank
13) which of the following currencies has the highest trading volume each day?
a.u.s. dollar
b.euro
c.yen
d.british pound
14) when the forward price of a currency is equal to the spot price, it is sold at a
forward ________.
a.premium
b.discount
c.flat
d.trade
15) when a multinational firm calculates a project for a foreign subsidiary with
________ net value, then the project should probably be ________.
a.zero, delayed
b.positive, sold
c.negative, accepted
d.positive, accepted
16) in the u.s. balance of payments, direct foreign investment is distinguished by
portfolio investment by:
a.the type of capital investment
b.type of industry
c.size of investment
d.percentage of ownership
17) during the currency contract period, if a devaluation happens after the contracts
have been signed,
a.there is no change in quantity of traded goods
b.the value of exports depends on which currency contracts agreed upon
c.the value of imports depends on which currency contracts agreed upon
d.all of a, b, and c are correct
18) one key implication of the mabr is that expansionary monetary policy:
a.always increases output
b.always decreases output
c.alters output in the short run, but not in the long run
d.does not alter output in the short run or the long run