1) suppose the dollar is devalued. if an import contract is written in dollars, then the
value of u.s. imports:
a.decrease
b.increase
c.stay the same
d.not possible to answer with the given information
2) the structure of interest rates existing on investment opportunities over time is known
as the ______ structure of interest rates.
a.investment
b.opportunity
c.fixed
d.term
3) unilateral payments include pensions, private transfers and ________.
a.demand deposits
b.foreign aid
c.tradable goods
d.tradable services
4) suppose that the one-year u.s. interest rate is 8% and the equivalent one-year india
interest rate is 12%. using the exact covered interest parity, the dollar is expected to:
a.depreciate by 3.6%
b.depreciate by 50%
c.appreciate by 3.6%
d.appreciate by 50%
5) which of the following is considered a capital outflow?
a.a sale of u.s. financial assets to a foreign buyer
b.a loan from a u.s. bank to a foreign borrower
c.a purchase of foreign financial assets by a u.s. buyer
d.a donation of $100,000 worth of wheat to nicaragua
6) which of the following are possible explanations for incomplete portfolio
diversification?
i.transaction costs
ii.home bias
iii.information costs
iv.taxes
a.i and ii
b.ii and iii
c.ii and iv
d.i, ii, iii, and iv
7) investors include various assets in the portfolio, to ________ the variability of the
portfolios returns.
a.simplify
b.increase
c.decrease
d.equalize
8) risk premiums decrease for domestic assets when:
a.the domestic government prohibits foreign investors
b.domestic investors fail to properly diversify internationally
c.a country moves from a global market to a segmented market
d.a country moves from a segmented market to a global market
9) figure 1.1
refer to figure 1.1. suppose that the market for british pound is initially in equilibrium at
point a with the exchange rate $2.00 per pound. then the demand curve shifts to d2. if
the british central bank wants to fix the exchange rate at $2.00/pound, they have to:
a.buy pound and sell dollar by the amount of q3 q1
b.sell pound and buy dollar by the amount of q3 q1
c.sell only pound by the amount of q3 q1 and leave dollar alone
d.buy only pound by the amount of q3 q1 and leave dollar alone
10) when the domestic demand for imports is perfectly inelastic, a devaluation will
_______ prices of imports in domestic currency and _________ the total domestic
import value.
a.decrease, decrease
b.increase, increase
c.decrease, have no effect on
d.increase, have no effect on