Exam 3 International Management

What are the two basic strategies that corporations use to minimize their tax burden? (Check all that apply.) - Profit sharing - Tax inversion - Tax evasion - Profit shifting

- Profit shifting - Tax inversion

How does inflation affect companies? (Check all that apply.) - High inflation rates bring low interest rates. - Rising inflation rates encourage debt. - High inflation rates cause the cost of goods to rise. - Rising inflation rates weaken the value of currencies. - It determines the real cost of borrowing.

- Rising inflation rates encourage debt. - High inflation rates cause the cost of goods to rise. - Rising inflation rates weaken the value of currencies. - It determines the real cost of borrowing.

Which of the following are contributing to the United States' substantial deficit in its current account? (Check all that apply.) - There is a surplus in the U.S. capital account. - The United States is importing more goods than it is exporting. - The United States is exporting more goods than it is importing. - Dollars are coming into the United States in the form of foreign-owned investments.

- There is a surplus in the U.S. capital account. - The United States is importing more goods than it is exporting. - Dollars are coming into the United States in the form of foreign-owned investments.

What four countries practice the free floating exchange rate approach? (Check all that apply.) - Japan - the Philippines - United States - United Kingdom - Sweden - South Africa

- United Kingdom - United States - Sweden - Japan

What are the main roles of the Bank for International Settlements? (Check all that apply.) - an agent for governments in international financial arrangements - a banker for central banks - an exchange market for currency trading - a center for research - a forum for international monetary cooperation

- a banker for central banks - a forum for international monetary cooperation - a center for research - an agent for governments in international financial arrangements

What are some reasons that explain why the effective rates of income tax are substantially lower than the statutory rates? (Check all that apply.) - tax levies on passive incomes - creative accounting - tax planning strategies - tax breaks through effective lobbying

- creative accounting - tax planning strategies - tax breaks through effective lobbying

Which of the following conditions in a country contribute to a current account deficit? (Check all that apply.) - excessive inflation - low gross national product - inadequate savings - low productivity

- excessive inflation - inadequate savings - low productivity

The Bretton Woods system goes by what two other names? (Check all that apply.) - gold exchange standard - conventional fixed-peg system - free floating exchange system - fixed-rate system

- gold exchange standard - fixed-rate system

True or False: Rising inflation rates discourage borrowing.

False (Reason: Rising inflation rates encourage borrowing because loans can be repaid in the future with cheaper money.)

What agreement established flexible exchange rates and condoned central bank operations in the money markets to smooth out unstable periods? A) General Agreement on Tariffs and Trade B) Jamaica Agreement C) Bretton Woods Agreement D) Geneva Agreement

Jamaica Agreement

A(n) __________ paradox occurs when a national currency that is also a reserve currency runs a deficit that leads to a lack of confidence in the reserve currency.

Triffin

True or False: As the supply of a currency increases, the price of the currency decreases.

True (Reason: As the supply of a currency increases, the price of the currency decreases.)

Which country imposes some sort of exchange control on its currency? A) Ukraine B) Japan C) United States D) Great Britain

Ukraine (Argentina, Pakistan, & China also impose some sort of exchange control on their currencies)

The Bank for International Settlements (BIS) is an international organization of central banks that exists to __________. A) research and find ways to reduce the unstable currency movements in the market. B) build cooperation and thus foster monetary and financial stability C) find ways to level the playing field between wealthy and poor nations D) determine the best currency arrangement for any given country

build cooperation and thus foster monetary and financial stability

What index measures changes in the price level of a market basket of consumer goods and services purchased by households? A) consumer price index B) balance of trade C) currency exchange index D) balance of payments

consumer price index

A hard currency that can be exchange for other currencies without government restrictions is called a(n) __________ currency.

convertible

Which currency exchange arrangement commits the country's government to holding foreign reserves of a specific currency in an amount equal to its domestic currency supply and to exchanging the two at a fixed rate? A) stabilized arrangement B) currency board arrangement C) managed float D) crawling band

currency board arrangement

Intervention Currency

currency used by central banks to intervene in the foreign currency exchange markets

Vehicle Currency

currency used for international trade or investment

The random walk hypothesis is related to which of the following forecasting approaches? A) technical analysis B) efficient market approach C) Wall Street approach D) fundamental approach

efficient market approach

Which currency exchange arrangement is in use when a group of countries adopt a common currency, such as the euro? A) stabilized arrangement B) conventional fixed-peg arrangement C) exchange arrangement with no separate legal tender D) crawling band

exchange arrangement with no separate legal tender

Gold has long been the trusted way for governments to measure the value of money. As trade increased, it became impractical to carry and store large amounts of gold. As a result, the __________ was established by Sir Isaac Newton as a system of valuing currency. A) currency standard B) fixed rate system C) gold standard D) floating rate system

gold standard

What system is made up of institutions, agreements, rules, and processes that allow for the cross-border movements of capital required for international transactions? A) globalization system B) World Bank system C) international monetary system D) free-trade system

international monetary system

In a floating exchange rate system, exchange rates are determined by __________. A) market forces of supply and demand B) the price of gold and silver C) the International Monetary Fund D) central bank negotiations

market forces of supply and demand

According to the Triffin paradox, the more __________ currency that foreign countries hold, the less confidence they have in the currency. A) gold B) reserve C) paper D) standard

reserve

Within a BOP account, a $2,000,000 deficit in the current account is accompanied by a $2,000,000 __________ in the capital account.

surplus (A deficit in the current account is always accompanied by an equal surplus in the capital account and vice versa.)

The __________ approach to exchange rate forecasting relies on trends that have occurred in the past to predict the future. A) efficient market B) technical analysis C) random walk D) fundamental

technical analysis

In a free floating exchange rate system, the currency's level is established by __________. A) a currency board B) the market C) each government D) a central bank

the market

A more recent development in the current monetary system is the use of __________, which are a type of electronic money issued by its developers, which can be used for payment in some environments, but does not have any legal status. A) vehicle currencies B) reciprocal currencies C) virtual currencies D) intervention currencies

virtual currencies