international bus chapter 5,6,7

The World Bank consists of two main bodies which are the:

IBRD and the International Development Association (IDA).

The Bretton Woods Agreement, with regard to currency conversion, established that:

only governments could convert their U.S. dollar holdings into gold

The _____ includes stock exchanges, bond markets, and futures and options markets, among others.

secondary market

The "ask" refers to:

the price at which a bank or a financial services firm is willing to sell that currency.

Non-finance companies prefer currency arbitrage and speculation while making investments, as they are not a risk and there are high gain methods of earning profits.

False

The _____ is the deliberative body of the UN and consists of all of the member countries that meet in regular sessions throughout the year.

General Assembly

Which of the following is true for the International Bank for Reconstruction and Development (IBRD)?

It disburses loans to countries with the purpose of building economies and reducing poverty.

Which of the following is true of the Jamaica Agreement?

It established the managed floating exchange rate system as the new international monetary system.

Which of the following is true for the International Finance Corporation (IFC)?

It facilitates sustainable development by improving investments in the private sector.

Which of the following is true about the Plaza Accord?

It focused on forcing down the value of the U.S. dollar through collective efforts.

Identify the correct statement about the Louvre Accord)

It focused on stabilizing the value of the dollar through collective efforts.

Which of the following is true about the Secretariat?

It oversees the operations of the UN and is technically headed by the Secretary-General.

Which of the following is true of equity securities?

It refers to the ownership of a part of a company.

most-favored-nation clause (MFN).

It required that once a benefit, usually a tariff reduction, was agreed on between two or more countries, it was automatically extended to all other member countries. GATT's initial focus was on tariffs, which are taxes placed on imports or exports.

The _____ removed gold as the primary reserve asset of the IMF.

Jamaica Agreement

Countries usually borrow for four main reasons

Recession,Investment,War,Politics

_____ refers to a main currency that many countries and institutions hold as part of their foreign exchange reserves.

Reserve currency

_____ refers to that arm of the United Nations which is responsible for issues related to economics, human rights, and social matters.

The Economic and Social Council

key takeaway 5.1

The General Agreement on Tariffs and Trade (GATT) is a series of rules governing trade that were first created in 1947 by twenty-three countries. It remained in force until 1995, when it was replaced by the WTO.

key takeaway 5.1 1

The World Trade Organization (WTO) is the only global, international organization dealing with the rules of trade between nations. The WTO agreements that have been negotiated and signed by the organization's 153 member nations and ratified in their parliaments are the heart of the organization. Its goal is to help the producers, exporters, and importers of goods and services conduct business. The current round of the WTO is called the Doha Round.

In the _____ approach, foreign exchange rates are expressed in terms of the number of U.S. dollars that can be exchanged for one unit of another currency.

direct quote

Venture capital refers to the:

investment made in an early- or growth-stage company.

General Agreement on Tariffs and Trade (GATT

is a series of rules governing trade that were first created in 1947 by twenty-three countries. By the time it was replaced with the WTO, there were 125 member nations. GATT has been credited with substantially expanding global trade, primarily through the reduction of tariffs.

A foreign bond is a bond:

issued in the currency of the country in which it is being sold

_____ in capital markets refers to the ease by which shareholders and bondholders can buy and sell their securities or convert their investments into cash.

liquidity

Currency speculation refers to the:

practice of buying and selling a currency with the expectation that the value will change and result in a profit.

Gold standard refers to the:

pre-World War I global monetary system that used gold as the basis of international economic exchange

The purpose of the International Monetary Fund is to:

promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.

Which of the following is true for forward contracts?

They are private contracts between two parties.

Which of the following is true for futures contracts?

They have clearinghouses that guarantee the transactions.

The _____ resulted in the end of GATT.

Uruguay Round

World Trade Organization (WTO)

When the WTO replaced GATT, it absorbed all of GATT's standing agreements. In contrast to GATT, which was a series of agreements, the WTO was designed to be an actual institution charged with the mission of promoting free and fair trade.

The _____ are often called the Bretton Woods Institutions.

World Bank and the IMF

Flexible Credit Line (FCL) refers to:

a fast-disbursing loan facility with low conditionality aimed at reassuring investors by injecting liquidity.

Rapid Credit Facility refers to:

a system of disbursing loans which is front-loaded and has low conditionality.

The Security Council is responsible for:

addressing issues related to peace and security.

Eurocurrency refers to:

any currency on deposit outside its country of issue

NAFTA rules state that:

at least 50 percent of the net cost of most products must come from or be incurred in the NAFTA region.

Forward contracts, currency swaps, options, and futures all belong to a group of financial instruments called:

derivatives.

Suppose we quote the number of Indian rupees required to purchase 1 U.S. dollar as INR 45 / USD 1. In this case, USD is referred to as:

base currency.

Trade creation refers to the:

increased number of opportunities for countries to trade with one another by removing barriers to trade and investment.

A _____ is a system in which people, companies, and governments with an excess of funds transfer those funds to people, companies, and governments that have a shortage of funds.

capital market

The Bretton Woods Agreement provided for the devaluation of a currency to enable:

countries to manage temporary but serious downturns.

A _____ is a simultaneous buy and sell of a currency for two different dates.

currency swap

The Benelux countries refer to:

Belgium, Luxembourg, and the Netherlands.

Eurodollar refers to:

U.S. dollars deposited in any bank outside the United States.

Which of the following is true of the gold standard as the international monetary system?

The volume of paper currency could not exceed the gold reserves.

The major significance of the _____ was that it was the first formal institution that governed international monetary systems.

Bretton Woods Agreement

_____ is the option or the right but not the obligation to exchange a specific amount of currency on a specific future date and at a specific agreed-on rate

Currency option

Which of the following is true for world financial centers?

They are central points for business and finance and are usually home to major corporations and banks or at least regional headquarters for global firms.

Which of the following is true of the Group of Five (G5)?

The reason for forming the group was the increasing value of the U.S. dollar, which pushed up the prices of U.S. exports, thereby increasing the trade deficit.

Fixed exchange rates and pegged rates were the two different measures of the exchange rate, which were developed by the United States and the United Kingdom respectively.

false

The collapse of the Bretton Woods system greatly reduced the influence of the Bretton Woods Institutions in the international market.

false

The goal of NAFTA has been to encourage trade between the South American countries.

false

The indirect quote method follows the American terms for noting the base and quoted currency.

false

Typically, the sell or the ask is always cheaper than the bid or the buy.

false

_____ refers to a situation when a currency's value increases or decreases based on demand and supply.

float

The _____ is the exchange rate at which a buyer and a seller agree to transact a currency at some date in the future

forward exchange rate

In the United States, retail and investment banks were barred from being under the same corporate umbrella by the:

glass-Steagall act

The World Bank provides a cheaper funding source for developing countries as most developing countries:

have considerably low credit ratings.

Triffin Paradox refers to:

the situation where the more dollars foreign countries held, the less faith they had in the ability of the U.S. government to convert those dollars.

A currency swap helps a firm to reduce its foreign exchange rate risk by simultaneously locking into the price for two transactions of a currency.

true

Currency option is a right but not a requirement and therefore parties in a currency option do not have to actually exchange the currencies if they choose not to.

true

Current account deficit refers to imports being greater than exports.

true

One of the advantages of the gold standard is that countries were forced to observe strict monetary policies.

true

The Bretton Woods Agreement established a higher level of economic stability by having a formal set of rules, regulations, and guidelines for decision making.

true

The global economic crisis of 2008 began with the 2007 collapse of mortgage lending in the United States.

true

The possibility of the trading of a currency in the forward market depends on the currency's demand in international financial markets.

true