Chapter 10 Understanding the International Monetary System and Financial Forces

QUESTION

1. Controllable
financial risks include foreign currency risks, national BOP, taxation,
tariffs, national monetary and fiscal policies, inflation, and national
business accounting rules.
True False

2. The
Euro is the most used vehicle and intervention currency.
True False

3. A
foreign exchange quotation is the price of one currency expressed in the terms
of another.
True False

4. If
one Japanese yen costs less than one U.S. cent, that means items automatically
cost less in Japan than they do in the U.S.
True False

5. A
currency used to pay for imports or investments is called an intervention
currency.
True False

6. The
belief that the United States is less likely than other counties to be subject
to a military coup makes the U.S. dollar a spot currency.
True False

7. When
you find an exchange quotation, which indicates: Swiss (franc) US$ equivalent
rate .6810, that means one Swiss franc costs US$.6810.
True False

8. The
spot rate is the exchange rate between two currencies for delivery in 10
days.
True False

9. The
forward rate is the exchange rate between two currencies for their immediate
trade for delivery within two days.
True False

10. McDonald’s
has been successful in international expansion despite the weakening of the
dollar largely due to the Big Mac Index.
True False

11. Currency
values fluctuate only when purchasing power parity suggests that they
should.
True False

ANSWER:

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