International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
• Assign points to the assignment. Instructors have found that if they give the
LearnSmart/SmartBook assignment a minimum of 10% of the course grade that students
are more likely to complete the assignment.
• The entire LearnSmart/SmartBook module is available to your student at all times,
however, assigning it will prompt students to try it. You are required to select a due date
for this assignment, however, this will not prevent the student from access to the tool; it
is designed to show you that the student has taken the LearnSmart/SmartBook
assignment. LearnSmart/ SmartBook is an adaptive study tool designed for students. It
can also show you where students are struggling to understand specific concepts.
• The student’s LearnSmart/SmartBook score in the Connect reports is based on their
mastery of the material at the time the assignment is due. Mastery is an evaluation of
the number of learning objectives they completed via performance on answering
questions.
• Students may, and are encouraged, to continue to use LearnSmart/SmartBook
throughout the semester. After the assignment due date, they can continue to access
this tool. Continued use of LearnSmart will not affect their LearnSmart/SmartBook
assignment results in the Connect reports, but has shown to improve test scores by as
much as a full letter grade.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
ENGAGEMENT & APPLICATION (FACE TO FACE & ONLINE & HYBRID)
BOXED TEXT DISCUSSION QUESTIONS WITH SUGGESTED ANSWERS
IB IN PRACTICE: G7 Foreign Exchange Intervention
After the 2011 earthquake and tsunami that hit Japan, the yen strengthened considerably. That
seemed illogical, because you would expect a country facing a disaster of such huge proportions
to have a weakening currency. Not only was the economy seriously damaged, but the nuclear
disaster added to the challenges for Japan. The yen strengthened on speculation that Japan’s
foreign businesses would repatriate money to assist in Japan’s recovery. This led to a G7
intervention in order to make the yen’s movements orderly and to reverse the strengthening.
This intervention was successful.
1. With a natural disaster, why would we expect a country’s currency to weaken?
2. Why were the G7 so quick to intervene?
GLOBAL DEBATE: Fixed FX Rates, Perhaps Hooked to Gold, or Floating Rates, Hooked
to Faith?
The global debate issue here is on whether foreign exchange rates should be fixed or floating.
The box contains the key arguments for both approaches.1. If the SDR were used, would a
2. Given the inclusion of the SDR, outline the pro and con arguments for a fixed–rate regime.
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
Con
It is questionable whether any government in a fixed rate system could handle the massive
amounts of foreign exchange required by increases in the trade volume. FX exceeds many
countries’ reserves.
A fixed-rate system would reduce governments’ control of their monetary policy.
Fixed rates would impact the economy considerably—inflation, interest rates.
GET THAT JOB! FROM BACKPACK TO BRIEFCASE Andrew Crane
Andrew Crane describes his beginning international experience and his work in microfinance.
His advice is to move to a country you would like to work in and find a job once you are there.
1. Would you consider making the same decision as Andrew Crane and put your graduation
off in order to extend your foreign experience?
2. Would you consider taking his advice and going to a country to hang out and investigate the
local job market for jobs?
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
END OF MODULE EXERCISES
CRITICAL THINKING QUESTIONS
1. Are people who argue today for a return to the gold system simply nostalgic or do
they have a point?
2. Was the Bretton Woods system bound to fail? Why or why not?
3. You are on a business trip from Portugal to the United States for 90 days, and you
have a per diem expense account of euro 400 per day, no receipts required. This per diem is
advanced to you before the trip (euro 36,000). You deposit it into your checking account and
use your Portuguese (euro) credit card to cover your costs while in the United States. After
the first two weeks of your trip, the dollar weakens against the euro by 15 percent. What
ethical dilemma might this currency fluctuation present for you? How will you handle it?
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
15 Instructor’s Manual – Module 8 | Geringer, McNett, Minor, Ball © 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
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The employee puts euro 36,000 in her European Bank. This was good for US$36,000 which was
the budgeted amount of dollars needed to cover expenses. At the end of the stay the credit card
company will convert the US$36,000 by dividing by 1.15, the new exchange rate (assume no
transaction costs for simplicity). This will yield euro 36,000x/1.15 or euro 31,304. The employee
has “made” euro 4,696!
4. If all nations used the SDR, what might the impact be on business?
5. Your firm is generating considerable revenues in a country that suddenly imposes
exchange controls prohibiting the purchase of foreign currency within the country and the
export of currency. What are some of the issues you will want to discuss with your regional
6. Your U.S. firm is about to sign a contract to supply services to a bank in Beijing, with
an up-front payment agreement of 50 percent. Do you want this payment in U.S. dollars?
Why or why not?
7. While the Federal Reserve has been slashing interest rates, the European Central Bank
is holding interest rates steady. Could this policy difference have influenced the relative
8. Your Boston-based company earned 54 percent of its profits from Germany and
France. Given your answer in question 7, are you happy today? Why or why not?
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International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
Yes, I am happy because i will be earning more dollars for my euro profits. Assuming the profit
stream in euros meets my operating expectations, then I can record much higher dollar profits in
Boston.
9. Your Munich-based company earns 64 percent of its revenues from high-precision
auto component exports to the United States. You need to expand manufacturing capacity,
and the U.S. market has great growth potential for your product. Your raw materials could be
sourced in either location relatively easily and with no cost advantage in either. Given your
answer in question 7, where would you be most likely to add capacity, in Germany or the
United States? Why?
10. Why should managers regularly monitor the balance of payments of the countries in
which their business operates?
International Business
Geringer, McNett, Minor, Ball
Instructor Guide to Module 8
MINICASE: SDR Exchange Risk
This minicase looks at the lending of the Asian Development Bank and its loan process. All of its
loans are made in SDR.
2. What are the currency amounts that make up the SDR?