QUESTION Under a currency board system, the government has the absolute authority to set interest rates. Indicate whether the statement is true or false. ANSWER FALSE Currency boards have their drawbacks. Under a currency board system, government lacks the ability to set interest rates.
Date: September 3rd, 2020
QUESTION Contracting out manufacturing may be more appropriate for high-value-added manufacturing Indicate whether the statement is true or false. ANSWER FALSE Contracting out manufacturing may be less appropriate for high-value-added manufacturing, in which firm-specific technology and skills add significant value to the product (e.g., the heavy equipment industry) and in which switching costs are […]
Date: September 3rd, 2020
QUESTION In the face of unpredictable exchange rate movements, a firm should pursue strategies that reduce its economic exposure. Indicate whether the statement is true or false. ANSWER TRUE The forward market tends to offer coverage for exchange rate changes a few months—not years—ahead. Given this, it makes sense to pursue strategies that will […]
Date: September 3rd, 2020
QUESTION The forward exchange market is an accurate predictor of future exchange rates. Indicate whether the statement is true or false. ANSWER FALSE The forward exchange market is far from perfect as a predictor of future exchange rates. The forward market tends to offer coverage for exchange rate changes a few months—not years—ahead. Given […]
Date: September 3rd, 2020
QUESTION Which of the following refers to the institutional arrangements that govern exchange rates? A. Generally accepted accounting principles B. General agreement on tariffs and trade C. International monetary system D. General agreement on trade in services E. Financial management information system ANSWER C
Date: September 3rd, 2020
QUESTION In which kind of exchange rate is the value of the currency fixed relative to a reference currency, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate? A. Flexible B. Pegged C. Real D. Dirty-float E. Floating ANSWER B
Date: September 3rd, 2020
QUESTION Which of the following refers to a system under which the exchange rate for converting one currency into another is continuously adjusted depending on the laws of supply and demand? A. Fixed exchange rate B. Floating exchange rate C. Forward exchange rate D. Pegged exchange rate E. Nominal exchange rate ANSWER B
Date: September 3rd, 2020
QUESTION Many of the world’s developing nations peg their currencies, primarily to the: A. U.S. dollar. B. Saudi riyal. C. Japanese yen. D. Chinese yuan. E. German deutsche mark. ANSWER A
Date: September 3rd, 2020
QUESTION In a floating exchange rate, the relative value of a currency: A. is more predictable and less volatile. B. is determined by market forces. C. changes infrequently only under a specific set of circumstances. D. is set against other currencies at some mutually agreed on exchange rate. E. does not depend on the free […]
Date: September 3rd, 2020
QUESTION In a fixed exchange rate system, the central bank of a country will intervene in the foreign exchange market to try to maintain the value of its currency if it depreciates too rapidly against an important reference currency. Indicate whether the statement is true or false. ANSWER FALSE A dirty float (as opposed […]
Date: September 3rd, 2020
