IB 300 Module 8 quiz

The three major taxes governments use to generate revenue are A. VAT, income tax, and withholding tax. B. sales tax, VAT, and income tax. C. property tax, VAT, and sales tax. D. income tax, property tax, and sales tax.

A. VAT, income tax, and withholding tax.

Exchange rate forecasting is A. important because exchange rates influence many aspects of business. B. important because markets depend on solid information and not estimates. C. unimportant because exchange rate forecasting does not have a theoretical model. D. unimportant because exchange rate movements do not impact international transactions.

A. important because exchange rates influence many aspects of business.

In general, with regard to exchange controls, developed countries A. rarely use them. B. use them only to discourage foreign investment. C. use them when needed to implement monetary policy. D. use them secretly.

A. rarely use them.

The three main approaches to exchange rate forecasting are A. the efficient market approach, the fundamental approach, and the technical analysis. B. the efficient market approach, the random walk hypothesis, and the pragmatic approach. C. the random walk hypothesis, the pragmatic approach, and the fundamental approach. D. guesswork, estimation, and approximation.

A. the efficient market approach, the fundamental approach, and the technical analysis.

Purchasing power parity is a way to compare A. the purchasing power between two currencies. B. the cost savings of economies of scale. C. the impact of financial aid in several economies. D. meals in different economic systems, via the Big Mac Index.

A. the purchasing power between two currencies.

The Japanese yen is an example of a convertible currency because it can be A. converted to gold at a higher rate. B. assigned an arbitrary value higher than its value in the free market. C. exchanged for other currencies without restriction. D. exchanged at the spot forward rate.

C. exchanged for other currencies without restriction.

Countries put limitations on the convertibility of their currency when they are concerned that A. there is too much domestic spending. B. foreigners will hold control of their monetary policy. C. their foreign reserves could be depleted. D. there is not enough domestic spending.

C. their foreign reserves could be depleted.

The international Fisher effect says that the interest rate differentials in any two currencies reflect: A. the ratio of their inflation rates minus COL. B. arbitrary differences in the two economies. C. PPP differences in the two economies. D. the expected change in their exchange rates.

D. the expected change in their exchange rates.

A company can use the inflation rate to determine the: a. capital structure of the firm. b. growth rate of sales. c. real cost of borrowing in capital markets. d. equilibrium point.

c. real cost of borrowing in capital markets.

Withholding tax is described as a. an indirect tax paid by employers before employees receive salaries. b. a direct tax levied on earned income. c. a 30 percent tax levied on foreign residents. d. an indirect tax levied on passive income.

d. an indirect tax levied on passive income.