man3600 ch 11 multiple choice

A French company sells goods to a foreign customer whose currency is depreciating against the euro. Which of the following will the company most likely experience when completing the sale? A) The company will receive fewer euros if the sales price was expressed in the buyer's currency. B) The company will receive more euros if the sales price was expressed in the buyer's currency. C) The company will receive fewer euros if the sales price was expressed in euros originally. D) The company will receive more euros if the sales price was expressed in euros originally.

A

A ________ is a facility for trading securities and other financial instruments, including shares issued by companies, trust funds, pension funds, and corporate and government bonds. A) stock exchange B) business strategic unit C) grey market D) shell corporation

A

Global Finance Meeting (Scenario) International finance experts are meeting in Tokyo for a weeklong conference to discuss the current state of global finance. At the conference are representatives from a variety of monetary and financial organizations. Expert A often works with international firms arranging capital in the form of shares. Expert B works for the Bank of Nova Scotia in the British Virgin Islands. Expert C advises international firms on corporate mergers. Expert C most likely works for which of the following? A) Merrill Lynch B) Banco General in Panama C) Federal Reserve Bank D) International Monetary Fund

A

High Inflation (Scenario) Country X primarily exports coffee beans, and in the last two years the demand for coffee beans has caused economic growth in Country X. To accommodate the economic growth, the central bank of Country X increased the nation's money supply. Country X is now experiencing inflation of over 200 percent. A group of economic experts, government representatives, and business owners have gathered for a conference in Country X to discuss the situation. Which of the following is most likely an additional problem faced by Country X due to its inflation? A) high interest rates B) herding behavior C) balance of trade D) country risk

A

Plas-Tex Exporting (Scenario) Plas-Tex Plastic Company manufactures plastic storage containers of all different sizes. Plas-Tex has been exporting more storage containers to Europe recently because of the depreciation of the U.S. dollar relative to the euro. Plas-Tex CEO, Wayne Chisholm, has prepared a report for the annual shareholders meeting in which he outlines his manufacturing and sales recommendations for the upcoming year. Which of the following supports maintaining the current production status instead of increasing production? A) The euro-dollar exchange rate is unpredictable due to its constant fluctuation. B) Exporters and importers typically profit from currency speculation. C) The euro/dollar exchange rate usually remains steady for long periods of time. D) The cost of living in the U.S. has risen dramatically in the last year.

A

Which of the following is an example of a country that has experienced dollarization? A) Ecuador B) Japan C) France D) Brazil

A

Which of the following is an example of a currency risk? A) purchasing products from a nation with appreciating currency B) purchasing products from a country with depreciating currency C) selling products to a country with appreciating currency D) selling products to a nation that has the same currency value as the exporter's

A

Which of the following is the most likely underlying reason for the demise of the Bretton Woods system? A) U.S. trade deficits B) creation of the EU C) gold depreciation D) WTO restrictions

A

Which of the following resolves the problem of making international payments and facilitates international investment and borrowing among firms, banks, and governments? A) foreign exchange B) barter C) capital flight D) buyback

A

Which of the following situations often results in a banking crisis? A) when investors withdraw funds from financial institutions B) when exchange rates fluctuate dramatically C) when governments borrow excessively from banks D) when a nation's currency rapidly depreciates

A

Which of the following statements is true of a dirty float? A) exchange rates fluctuate with occasional central bank intervention B) beneficial exchange rates are offered in trade with certain nations C) fixed exchange rates are set and maintained by the World Bank D) currency values rise and fall according to the U.S. dollar

A

Which of the following terms refers to the government reduction of its currency value relative to the other currency values? A) devaluation B) hyperinflation C) depreciation D) fluctuation

A

A U.S. company buys from a supplier whose currency is increasing against the dollar. Which of the following will the company most likely have to do if the purchasing price is expressed in the supplier's currency? A) pay less in dollars than originally expected B) pay more in dollars than originally expected C) pay the same amount of dollars as originally expected D) pay part of the transaction in the supplier's currency

B

Currency risk can best be defined as the risk that occurs when ________. A) currency values remain constant for prolonged periods B) one currency changes in relation to another currency C) buyers and sellers disagree over which currency to use D) fluctuations in the stock market affect all exchange rates

B

Each of the following factors significantly affects the balance of trade EXCEPT ________. A) exchange rate B) market share C) prices of goods D) trade barriers

B

Plas-Tex Exporting (Scenario) Plas-Tex Plastic Company manufactures plastic storage containers of all different sizes. Plas-Tex has been exporting more storage containers to Europe recently because of the depreciation of the U.S. dollar relative to the euro. Plas-Tex CEO, Wayne Chisholm, has prepared a report for the annual shareholders meeting in which he outlines his manufacturing and sales recommendations for the upcoming year. Which of the following questions would be more important for Chisholm to evaluate before presenting his manufacturing recommendations to shareholders? A) What was the impact of the exchange rate on European exports last year? B) What is the currency risk of exporting additional Plas-Tex products to Europe? C) How effective has the Plas-Tex marketing campaign been in Europe? D) What was the impact on Plas-Tex sales when the euro depreciated last year?

B

The U.S. dollar is an example of ________. A) soft currency B) convertible currency C) nonconvertible currency D) private currency

B

Which of the following best characterizes the functions of the World Bank? A) monitor interest rates in emerging economies B) provide loans and technical assistance to developing countries C) offer financial assistance to small businesses D) initiate trading for impoverished nations

B

Which of the following does the central bank perform in order to accommodate a nation's economic growth? A) enforce strict regulations on foreign direct investment B) increase the nation's money supply C) establish a voluntary export restraint D) restrict innovation and entrepreneurship

B

Which of the following is an effect caused by capital flight? A) It increases the need for domestic investment holdings. B) It decreases the ability of the nation to service debt and pay for imports. C) It reduces harmful currency restrictions. D) It decreases the nation's supply of hard currencies.

B

Which of the following levels of the global monetary and financial systems pyramid includes commercial banks? A) national government level B) national infrastructure level C) international organization level D) firm level

B

________ are mangers of pensions and mutual funds, as well as insurance companies who have assumed an enormous role in driving capital markets around the world. A) Entrepreneurs B) Institutional investors C) Angel investors D) Venture capitalists

B

Global Finance Meeting (Scenario) International finance experts are meeting in Tokyo for a weeklong conference to discuss the current state of global finance. At the conference are representatives from a variety of monetary and financial organizations. Expert A often works with international firms arranging capital in the form of shares. Expert B works for the Bank of Nova Scotia in the British Virgin Islands. Expert C advises international firms on corporate mergers. Expert A most likely works for which of the following? A) Union Bank in Switzerland B) Bank of America C) Arab-Malaysian Merchant Bank D) Goldman Sachs

C

High Inflation (Scenario) Country X primarily exports coffee beans, and in the last two years the demand for coffee beans has caused economic growth in Country X. To accommodate the economic growth, the central bank of Country X increased the nation's money supply. Country X is now experiencing inflation of over 200 percent. A group of economic experts, government representatives, and business owners have gathered for a conference in Country X to discuss the situation Which of the following should be considered before the government takes any action to correct the high rate of inflation? A) What have been the historical consequences of trade barriers in Country X? B) What is the current price of coffee in the United States and Europe? C) What will be the long-term effects of currency depreciation to Country X? D) What other industries in Country X could replace agriculture

C

High Inflation (Scenario) Country X primarily exports coffee beans, and in the last two years the demand for coffee beans has caused economic growth in Country X. To accommodate the economic growth, the central bank of Country X increased the nation's money supply. Country X is now experiencing inflation of over 200 percent. A group of economic experts, government representatives, and business owners have gathered for a conference in Country X to discuss the situation. Which of the following questions would be more important to evaluate in determining the reason behind the inflation in Country X? A) Has momentum trading of agricultural commodities been occurring in Country X? B) What is the exchange rate between Country X currency and the euro? C) How quickly was the money supply increased by the central bank of Country X? D) How many pounds of coffee beans are being imported annually to Country X?

C

Plas-Tex Exporting (Scenario) Plas-Tex Plastic Company manufactures plastic storage containers of all different sizes. Plas-Tex has been exporting more storage containers to Europe recently because of the depreciation of the U.S. dollar relative to the euro. Plas-Tex CEO, Wayne Chisholm, has prepared a report for the annual shareholders meeting in which he outlines his manufacturing and sales recommendations for the upcoming year. Which of the following should be considered closely before Chisholm recommends increasing production to take advantage of the current exchange rate? A) What is the expected outcome of Plas-Tex negotiations with an Asian manufacturer? B) How much revenue did Plas-Tex generate from European sales last year? C) What will be the effect on Plas-Tex if the euro depreciates more than the U.S. dollar? D) What has been the historic impact of capital flight on Plas-Tex revenues?

C

The Bretton Woods Agreement most likely influenced the current trend towards international free trade when member countries agreed to ________. A) no longer impose trading tariffs within economic blocs B) provide low interest loans to poor countries C) not impose restrictions on currency trading D) implement a multilateral trade and investment system

C

Which of the following is a characteristic of a bond? A) It is a short-term loan from a commercial bank. B) It refers to capital raised by selling corporate shares. C) It refers to a debt security used to raise capital. D) It is a debt instrument on which dividends are paid.

C

Which of the following is a characteristic of momentum trading? A) Investors buy stocks as prices fall. B) Investors sell stocks when others sell. C) Investors buy stocks as prices rise. D) Investors buy and sell stocks spontaneously.

C

Which of the following is characteristic of the fixed exchange rate system? A) utilized by most advanced economies B) rates based on supply and demand forces C) value of currency is set relative to the value of another D) allows for monetary policy flexibility

C

Which of the following statements is most likely to be true regarding a currency's price if the supply of the currency increases? A) The price of the currency fluctuates randomly. B) The price of the currency remains constant. C) The price of the currency lowers. D) The price of the currency increases.

C

Which of the following statements is true of the global financial system? A) It consists of the institutional frameworks, rules, and procedures that govern how national currencies are exchanged for one another. B) It includes key players such as finance ministries and national stock exchanges but excludes commercial banks and central banks. C) It is built on the activities of firms, banks, and financial institutions engaged in ongoing international financial activity. D) Since the 1960s, the volume and structure of the global financial system has been reducing.

C

Which of the following statements is true regarding the value of national currencies? A) They cannot be quantified. B) They remain highly stable. C) They fluctuate constantly. D) They change occasionally.

C

Which of the following terms refers to the type of currency used only for domestic business transactions? A) hard currency B) convertible currency C) nonconvertible currency D) alternative currency

C

Which of the following, originally known as the International Bank for Reconstruction and Development, was founded to fund construction of Japan and Europe after World War II? A) The International Monetary Fund B) The Financial Stability Board C) The World Bank D) Bank for International Settlements

C

Global Finance Meeting (Scenario) International finance experts are meeting in Tokyo for a weeklong conference to discuss the current state of global finance. At the conference are representatives from a variety of monetary and financial organizations. Expert A often works with international firms arranging capital in the form of shares. Expert B works for the Bank of Nova Scotia in the British Virgin Islands. Expert C advises international firms on corporate mergers. The employer of Expert B can most likely be categorized as which of the following? A) investment bank B) private bank C) commercial bank D) offshore bank

D

If demand for the dollar is low, the price of the dollar is most likely to ________. A) rise B) remain stable C) fall, then rise D) fall

D

If last year one dollar equaled one euro, and then the exchange rate shifted so that today one dollar equals two euros, which of the following would most likely NOT occur? A) European firms would pay more for raw materials imported from the United States. B) European consumers would purchase fewer U.S. products and services. C) Fewer Europeans would travel to the U.S. or study at U.S. universities. D) European firms would lower their prices on goods made with U.S. parts.

D

The levels of supply and demand for a currency in a free market vary ________ with its price. A) rarely B) occasionally C) directly D) inversely

D

The purpose of the Bretton Woods Agreement was to ________. A) enable the U.S. Government to monetarily recover after WWII B) control the fluctuating price of gold used for global trading C) oversee the importing and exporting of international traders D) govern the exchange rates of major international currencies

D

Which of the following best describes the role that the international monetary system plays with foreign firms? A) underwrite stock and bond issues and give advice on mergers B) establishes regulations for FDI financing C) oversees finance and trade in developing nations D) provides a framework for monetary and foreign exchange activities worldwide

D

Which of the following should an international manager keep in mind about the constantly fluctuating exchange rates? A) The prices the firm charges should be quoted in the firm's currency exclusively. B) The firm and its customers should use the exchange rate as it stands on the date of each transaction, there is no scope for an agreement between them to use any other specific exchange rate. C) If goods are bought from a supplier whose currency is appreciating against the buyer's currency, the buyer will have to pay a lesser amount of their currency to complete the purchase. D) The time taken between placement and delivery of an order can at times go up to a few months, fluctuations in the exchange rate during that time can cost or earn the firm money

D

Which of the following statements is true about currencies? A) The British pound is an example of a nonconvertible currency. B) Hard currencies are highly unstable currencies. C) Currencies that are used for international transactions are called nonconvertible. D) Convertible currencies can be readily exchanged for other currencies.

D

Which of the following statements is true of the global debt crisis? A) Fiscal imbalances are the least important source of risk and uncertainty in the global business environment. B) The smallest proportion of government debt results from national pension and healthcare programs. C) Debt has substantially decreased in major advanced economies mainly due to excessive government spending. D) When a government tries to pay down its debt, money is drawn out of the national money supply, which hinders economic activity and reduces tax revenues.

D

Which of the following statements is true of trade surplus? A) It is a negative balance of trade. B) It occurs when there is a net outflow of domestic currency to foreign markets. C) It occurs when a nation imports as much as it exports. D) It occurs when a nation's exports exceed its imports.

D

Which of the following terms refers to the difference between the total amount of money flowing into and out of a nation over the course of a year? A) momentum trading B) trade surplus C) exchange rate system D) balance of payments

D

Which of the following terms refers to the price of one currency expressed in terms of another? A) countertrade B) monetization C) credit derivative D) exchange rate

D

Which of the following would a firm considering a corporate merger consult for issues related to the merger? A) private bank B) offshore bank C) commercial bank D) investment bank

D

________ is the tendency of investors to mimic each others' actions. A) Switch trading B) Dumping C) Momentum trading D) Herding

D