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1. Which of the following assets makes use of the basket valuation technique?
a.
Swap agreements
b.
Oil facility
c.
Buffer stock facility
d.
Special drawing rights
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Special Drawing Rights
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
2. Swap agreements are generally conducted by the:
a.
Federal Reserve with foreign central banks
b.
Federal Reserve with foreign commercial banks
c.
U.S. Treasury with foreign central banks
d.
U.S. Treasury with foreign commercial banks
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
3. Which of the following is a main central bank function of the International Monetary Fund?
a.
b.
c.
d.
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
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Page 2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
4. The Federal Reserve’s swap network represents:
a.
Efforts to stabilize only the value of the dollar
b.
Efforts to stabilize only the value of foreign currencies
c.
Long-term borrowing among countries
d.
Short-term borrowing among countries
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
5. International trade and investment are most frequently financed by the U.S. dollar and the:
a.
Japanese yen
b.
British pound
c.
Australian dollar
d.
Swiss franc
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Facilities for Borrowing Reserves
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
6. The purpose of international reserves is to finance:
a.
Short-term surpluses in the balance of payments
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b.
Long-term surpluses in the balance of payments
c.
Short-term deficits in the balance of payments
d.
Long-term deficits in the balance of payments
ANSWER:
c
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
7. The currencies generally referred to as “reserve currencies” are the:
a.
Japanese yen and U.S. dollar
b.
Swiss franc and Japanese yen
c.
British pound and U.S. dollar
d.
Swiss franc and British pound
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currencies
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
8. Which of the following does not represent a form of international liquidity?
a.
IMF reserve positions
b.
General arrangements to borrow
c.
U.S. government securities
d.
Reciprocal currency arrangements
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
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STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currencies
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
9. Which of the following is not considered an “owned” reserve?
a.
National currencies
b.
Gold
c.
Special drawing rights
d.
Oil facility
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currencies
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
10. Which of the following is not considered a “borrowed” reserve?
a.
Special drawing rights
b.
Oil facility
c.
IMF drawings
d.
Reciprocal currency arrangement
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currencies
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
11. Eurodollars are:
a.
Dollar-denominated deposits in overseas banks
b.
European currencies used to finance transactions in the United States
c.
Dollars that U.S. residents spend in Europe
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d.
European currencies used to finance imports from the United States
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currencies
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
12. Which of the following is not a characteristic of the Eurodollar market? It:
a.
Is mainly located in the United Kingdom and continental Europe
b.
Operates as a financial intermediary, bringing together lenders and borrowers
c.
Deals in interest-bearing time deposits and loans to governments
d.
Grew in response to the deregulation of interest rate ceilings on U.S. savings accounts
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currencies
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
13. Which of the following assets was (were) created in 1970 to provide additional international liquidity, in the belief that
increasing world trade requires more liquidity for larger expected payments imbalances?
a.
Eurodollar market
b.
Special drawing rights
c.
Reciprocal currency arrangements
d.
General arrangements to borrow
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Copyright Cengage Learning. Powered by Cognero.
Page 6
TOPICS:
Special Drawing Rights
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
14. Which of the following constitute(s) the largest component of the world’s international reserves?
a.
Gold
b.
Special drawing rights
c.
IMF drawings
d.
Foreign currencies
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
15. With an international gold standard, if a country ended up with a deficit from the balances on its current and capital
accounts, it would:
a.
Import gold to settle the balance
b.
Export gold to settle the balance
c.
Officially decrease the price of gold
d.
Officially increase the price of gold
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Gold
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
16. Which of the following is not a condition of the international gold standard? That a nation must:
a.
Convert gold into paper currency, and vice versa, at a stipulated rate
b.
Permit gold to be freely imported and exported
c.
Tolerate wide fluctuations in its exchange rate
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d.
Define its monetary unit in terms of a stipulated amount of gold
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Gold
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
17. All of the following exchange-rate systems require international reserves to finance balance-of-payments
disequilibriums except:
a.
Pegged or fixed exchange rates
b.
Managed floating exchange rates
c.
Adjustable pegged exchange rates
d.
Freely floating exchange rates
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currencies
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
18. A dollar shortage would indicate that the dollar is:
a.
Undervalued in international markets
b.
Overvalued in international markets
c.
Overvalued in terms of gold
d.
Overvalued in terms of special drawing rights
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Copyright Cengage Learning. Powered by Cognero.
Page 8
TOPICS:
Supply of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
19. The U.S. gold outflow that began in the late 1940s and continued through the 1960s was due in part to:
a.
Crawling pegged exchange rates
b.
Freely floating exchange rates
c.
An undervalued dollar
d.
An overvalued dollar
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Gold
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
20. The U.S. dollar glut of the 1960s was due in part to:
a.
An undervalued dollar
b.
An overvalued dollar
c.
Freely floating exchange rates
d.
Crawling pegged exchange rates
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currencies
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
21. For developing countries such as Mexico and Brazil, severe economic problems in the 1980s were caused by:
a.
A fall in the world demand for products produced by developing countries
b.
High prices of basic raw materials and other commodities
c.
Low real interest rates in the United States
d.
High levels of income and imports for the United States
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ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
The Problem of International Debt
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
22. In response to the international debt problem, the United States set up a special fund in 1986 to help make up for lost
oil revenues. Under the plan, the United States would make more money available as world oil prices fell. This plan was
designed to help:
a.
Argentina
b.
Saudi Arabia
c.
Mexico
d.
Brazil
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
The Problem of International Debt
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
23. Which indicator of international debt burden schedules interest and principal payments on long-term debt as a percent
of export earnings?
a.
Debt service ratio
b.
Debt-to-export ratio
c.
Ratio of external debt to gross domestic product
d.
Ratio of external debt to gross national product
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
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Page 10
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Debt Reduction and Debt Forgiveness
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
24. Which term best describes the process in which the International Monetary Fund provides loans to countries facing
balance-of-payments difficulties provided that they initiate programs holding promise of correcting these difficulties?
a.
Conditionality
b.
Debt service
c.
Reciprocal currency arrangement
d.
Swap agreement
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Debt Reduction and Debt Forgiveness
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
25. All of the following are major goals of the International Monetary Fund except:
a.
Promoting international cooperation among member countries
b.
Fostering a multilateral system of international payments
c.
Making long-term development and reconstruction loans
d.
Promoting exchange-rate stability and the elimination of exchange restrictions
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Demand for International Reserves
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
26. Which international reserve asset was officially phased out of the international monetary system by the United States
in the early 1970s?
a.
Special drawing rights
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Page 11
b.
Swap agreements
c.
General arrangements to borrow
d.
Gold
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Gold
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
27. Bilateral agreements between central banks, which provide for an exchange of currencies to help finance temporary
balance-of-payments disequilibriums, are referred to as:
a.
IMF drawings
b.
Special drawing rights
c.
Buffer stock facility
d.
Swap agreements
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reducing Bank Exposure to Developing Nation Debt
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
28. Which organization is largely intended to make long-term reconstruction loans to developing nations?
a.
Export-Import Bank
b.
World Bank
c.
International Monetary Fund
d.
United Nations
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
Copyright Cengage Learning. Powered by Cognero.
Page 12
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reducing Bank Exposure to Developing Nation Debt
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
29. “Owned” international reserves consist of:
a.
Special drawing rights
b.
Oil facility
c.
IMF drawings
d.
Reciprocal currency arrangements
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
30. “Borrowed” international reserves consist of:
a.
IMF drawings
b.
Foreign currencies
c.
Gold
d.
Special drawing rights
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
31. Concerning international lending risk of commercial banks, ____ refers to the probability that part/all of the
interest/principal of a loan will not be repaid.
a.
Country risk
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Page 13
b.
Credit risk
c.
Currency risk
d.
Presidential risk
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
International Lending Risk
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
32. Concerning international lending risk of commercial banks, ____ is closely related to political developments in a
borrowing country, especially the government’s views concerning international investments and loans.
a.
Economic risk
b.
Credit risk
c.
Country risk
d.
Currency risk
ANSWER:
c
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
International Lending Risk
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
33. Concerning international lending risk of commercial banks, ____ is associated with possible changes in the exchange
value of a nation’s currency.
a.
Political risk
b.
Country risk
c.
Credit risk
d.
Currency risk
ANSWER:
d
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
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Page 14
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
International Lending Risk
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
34. To reduce their exposure to developing country debt, lending commercial banks have practiced all of the following
except:
a.
Making outright loan sales to other commercial banks
b.
Reducing their capital base as a cushion against losses
c.
Dealing in debt-for-debt swaps with foreign governments
d.
Dealing in debt/equity swaps with foreign governments
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reducing Bank Exposure to Developing Nation Debt
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
35. To reduce losses on developing country loans, commercial banks sometimes sell their loans, at a discount, to a
developing country government for local currency which is then used to finance purchases of ownership shares in
developing country industries. This practice is known as:
a.
Debt forgiveness
b.
Debt buyback
c.
Debt-for-debt swap
d.
Debt/equity swap
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reducing Bank Exposure to Developing Nation Debt
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
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Page 15
36. Concerning international debt, ____ refers to a negotiated reduction in the contractual obligations of the debtor
country and includes schemes such as markdowns and write-offs of debt.
a.
Debt/equity swap
b.
Debt-for-debt swap
c.
Debt forgiveness
d.
Debt sales
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
The Problem of International Debt
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
37. The exchange of borrowing country debt for an ownership position in the borrowing country is known as:
a.
Debt forgiveness
b.
Debt-for-debt swap
c.
Debt reduction
d.
Debt/equity swap
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Debt Reduction and Debt Forgiveness
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
38. “Country risk” analysis is concerned with all of the following except:
a.
Depreciation of the borrowing country’s currency
b.
Political instability in the borrowing country
c.
Economic growth in the borrowing country
d.
External debt of the borrowing country
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
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Page 16
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
International Lending Risk
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
39. Debt reduction
a.
Refers to any voluntary scheme that lessens the burden on the debtor nation
b.
May be accomplished through debt rescheduling
c.
May be achieved through debt/equity swaps
d.
All of the above
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Debt Reduction and Debt Forgiveness
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
40. Most analysts feel that the financial difficulties in East Asia were triggered by
a.
Misallocation of investment
b.
Unavailability of cheap foreign labor
c.
Lack of alignment of the exchange rate with the dollar
d.
Surpluses in the trade accounts of the Asian countries
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
International Lending Risk
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
41. A nation may experience debt-servicing problems because of
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Page 17
a.
Pursuit of improper macroeconomic policies
b.
Inadequate borrowing
c.
Adverse economic events
d.
Both a and c
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
The Problem of International Debt
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
42. Swap arrangements
a.
Are agreements between governments
b.
Require repayment within a stipulated period
c.
Are usually multilateral agreements
d.
Are never initiated by telephone
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – BUSPROG: Reflective Thinking
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Debt Reduction and Debt Forgiveness
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
The diagram below represents the exchange market position of the United States in trade with the United Kingdom.
Starting at the equilibrium exchange rate of $3 per pound, suppose the demand for pounds rises from D0 to D1.
Figure 17.1 Foreign Exchange Market
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Page 18
43. In the market for British Pounds the demand is represented by D0 and supply by S0. If the exchange rate is fixed at $3
and the demand for pounds increases to D1, US monetary authorities will need to
a.
supply 8 million poundds to the market
b.
supply 4 million pounds to the market
c.
supply 2 million pounds to the market
d.
do nothing
ANSWER:
a
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 17.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Demand for International Reserves
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
44. In the market for British Pounds the demand is represented by D0 and supply by S0. If the exchange rate is allowed to
rise as high as $4 and the demand for pounds increases to D1, US monetary authorities will need to
a.
supply 8 million pounds to the market
b.
supply 4 million pounds to the market
c.
supply 2 million pounds to the market
d.
do nothing
ANSWER:
b
POINTS:
1
DIFFICULTY:
Challenging
Copyright Cengage Learning. Powered by Cognero.
Page 19
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 17.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Demand for International Reserves
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
45. In the market for British Pounds the demand is represented by D0 and supply by S0. If the exchange rate is flexible
and the demand for pounds increases to D1, US monetary authorities will need to
a.
supply 8 million pounds to the market
b.
supply 4 million pounds to the market
c.
supply 2 million pounds to the market
d.
do nothing
ANSWER:
d
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 17.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Demand for International Reserves
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:27 PM
DATE MODIFIED:
6/22/2016 3:27 PM
46. Under a system of fixed exchange rates, international reserves are needed to bridge the gap between monetary receipts
and monetary payments.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Nature of International Reserves
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:27 PM