MBA
MKT 640 / MKT640
FOREIGN INVESTMENT DECISIONS
Question 1
Under a purely flexible exchange rate system:
Governments can set the exchange rate by buying or selling reserves
Governments can set exchange rates with fiscal policy
Supply and demand set the exchange rates
Both supply and demand set the exchange rates and governments can set exchange rates
with fiscal policy
Question 2
Under the Bretton Woods system:
each country was responsible for maintaining its exchange rate within 1 percent of the
adopted par value by buying or selling foreign exchanges as necessary
all of the above
the U.S. dollar was the only currency that was fully convertible to gold
there was an explicit set of rules about the conduct of international monetary policies
Question 3
Since the SDR is a “portfolio” of currencies:
Its value tends to be more stable than the value of any of the individual currencies included
in the SDR
None of the above
Its value tends to be as stable as the average of the individual currencies included in the
SDR
Its value tends to be less stable than the value of any of the individual currencies included in
the SDR
Question 4
Under a gold standard, if Britain exported more to France than France exported to Great Britain:
Such international imbalances of payment will be corrected automatically
, Net export from Britain will be accompanied by a net flow of gold in the opposite direction
This type of imbalance will not be able to persist indefinitely
All of the above
Question 5
With regard to the current exchange rate arrangement between the U.S. and the U.K., it is best
characterized as:
Currency board
Pegged exchange rate within a horizontal band.
Managed float
Independent floating (market determined)
Question 1
Suppose that Britain pegs the pound to gold at six pounds per ounce, whereas the exchange rate
between pounds and U.S. dollars is $5 = £1. What should an ounce of gold be worth in U.S.
dollars?
$1.20
$0.83
$30.00
$29.40
Question 2
A currency board arrangement is:
When the country belongs to a monetary or currency union in which the same legal tender is
shared by the members of the union.
When the currency of another country circulates as the sole legal tender
Where the country pegs its currency at a fixed rate to a major currency where the exchange
rate fluctuates within a narrow margin of less than one percent.
A monetary regime based on an explicit legislative commitment to exchange domestic
currency for a specified foreign currency at a fixed exchange rate, combined with restrictions on
the issuing authority to ensure the fulfillment of its legal obligation.
Question 3
MKT 640 / MKT640
FOREIGN INVESTMENT DECISIONS
Question 1
Under a purely flexible exchange rate system:
Governments can set the exchange rate by buying or selling reserves
Governments can set exchange rates with fiscal policy
Supply and demand set the exchange rates
Both supply and demand set the exchange rates and governments can set exchange rates
with fiscal policy
Question 2
Under the Bretton Woods system:
each country was responsible for maintaining its exchange rate within 1 percent of the
adopted par value by buying or selling foreign exchanges as necessary
all of the above
the U.S. dollar was the only currency that was fully convertible to gold
there was an explicit set of rules about the conduct of international monetary policies
Question 3
Since the SDR is a “portfolio” of currencies:
Its value tends to be more stable than the value of any of the individual currencies included
in the SDR
None of the above
Its value tends to be as stable as the average of the individual currencies included in the
SDR
Its value tends to be less stable than the value of any of the individual currencies included in
the SDR
Question 4
Under a gold standard, if Britain exported more to France than France exported to Great Britain:
Such international imbalances of payment will be corrected automatically
, Net export from Britain will be accompanied by a net flow of gold in the opposite direction
This type of imbalance will not be able to persist indefinitely
All of the above
Question 5
With regard to the current exchange rate arrangement between the U.S. and the U.K., it is best
characterized as:
Currency board
Pegged exchange rate within a horizontal band.
Managed float
Independent floating (market determined)
Question 1
Suppose that Britain pegs the pound to gold at six pounds per ounce, whereas the exchange rate
between pounds and U.S. dollars is $5 = £1. What should an ounce of gold be worth in U.S.
dollars?
$1.20
$0.83
$30.00
$29.40
Question 2
A currency board arrangement is:
When the country belongs to a monetary or currency union in which the same legal tender is
shared by the members of the union.
When the currency of another country circulates as the sole legal tender
Where the country pegs its currency at a fixed rate to a major currency where the exchange
rate fluctuates within a narrow margin of less than one percent.
A monetary regime based on an explicit legislative commitment to exchange domestic
currency for a specified foreign currency at a fixed exchange rate, combined with restrictions on
the issuing authority to ensure the fulfillment of its legal obligation.
Question 3
