AGB 302 CORRECT 2027 EXAMS ANSWERS AND
QUESTIONS SET A+
✔✔home country costs of fdi (3) - ✔✔-capital outflow
-exporting jobs abroad
✔✔home country benefits of fdi (3) - ✔✔-Positive balance-of-payments effects
-Positive employment effects
-Reverse resource-transfer effect
✔✔knickerbocker's theory - ✔✔imitative behavior
✔✔market maker - ✔✔connects investors and borrowers
✔✔hedge fund - ✔✔private investment funds making long bets on increase in value and
short bets on decrease in value
✔✔global equity/capital market - ✔✔-Attract capital from international investors
-List their stock on multiple exchanges
-Raise funds by issuing debt or equity around the world
✔✔market maker that borrows money - ✔✔government
✔✔debt loan - ✔✔payment back in intervals regardless of profit
✔✔systematic risk - ✔✔Movements in a stock portfolio's value that are attributable to
macroeconomic forces affecting all firms in an economy, rather than factors specific to
an individual firm (unsystematic risk).
✔✔integrated international capital market is - ✔✔highly volatile
✔✔eurocurrency - ✔✔Any currency banked outside its country of origin.
✔✔domestic currency deposits are - ✔✔regulated in most countries
, ✔✔higher interest on deposits and less on loans= - ✔✔eurocurrency market
✔✔forward contract - ✔✔hedging against foreign exchange risk
✔✔a capital market brings together - ✔✔borrowers and investors
✔✔equity loan - ✔✔corporation sells stock to investors
✔✔eurobond - ✔✔bond issued outside the country in whose currency it is denominated
✔✔eurobond market is attractive because (3) - ✔✔-It lacks regulatory interference
-It has less stringent disclosure requirements than domestic bond markets
-It is more favorable from a tax perspective
✔✔why list stock in another country's exchange (4) - ✔✔-facilitate future stock swaps
-use stock to compensate
-satisfy local ownership desires
-increase company's visibility
✔✔when borrowing from the global capital market, the risk is - ✔✔adverse exchange
rate movements
✔✔Regional Economic Integration - ✔✔cooperation of nation states economically
✔✔list integration from least to most integrated - ✔✔free trade, customs union, common
market, economic union, full political union
✔✔free trade area - ✔✔all barriers are removed, each country allowed to create its own
barriers, tariffs vary (EFTA and NAFTA)
✔✔customs union - ✔✔eliminates trade barriers and adopts a common external trade
policy
✔✔common market - ✔✔no barriers to trade among member countries, includes a
common external trade policy, and allows factors of production to move freely among
members
✔✔economic union - ✔✔Free trade between member countries and common external
trade policy, free movement of production factors, and Common Currency, Tax Policy
Harmonization, Common Monetary and Fiscal Policy (plus cooperation do be hard tho)
✔✔political union - ✔✔a central political apparatus coordinates economic, social, and
foreign policy
QUESTIONS SET A+
✔✔home country costs of fdi (3) - ✔✔-capital outflow
-exporting jobs abroad
✔✔home country benefits of fdi (3) - ✔✔-Positive balance-of-payments effects
-Positive employment effects
-Reverse resource-transfer effect
✔✔knickerbocker's theory - ✔✔imitative behavior
✔✔market maker - ✔✔connects investors and borrowers
✔✔hedge fund - ✔✔private investment funds making long bets on increase in value and
short bets on decrease in value
✔✔global equity/capital market - ✔✔-Attract capital from international investors
-List their stock on multiple exchanges
-Raise funds by issuing debt or equity around the world
✔✔market maker that borrows money - ✔✔government
✔✔debt loan - ✔✔payment back in intervals regardless of profit
✔✔systematic risk - ✔✔Movements in a stock portfolio's value that are attributable to
macroeconomic forces affecting all firms in an economy, rather than factors specific to
an individual firm (unsystematic risk).
✔✔integrated international capital market is - ✔✔highly volatile
✔✔eurocurrency - ✔✔Any currency banked outside its country of origin.
✔✔domestic currency deposits are - ✔✔regulated in most countries
, ✔✔higher interest on deposits and less on loans= - ✔✔eurocurrency market
✔✔forward contract - ✔✔hedging against foreign exchange risk
✔✔a capital market brings together - ✔✔borrowers and investors
✔✔equity loan - ✔✔corporation sells stock to investors
✔✔eurobond - ✔✔bond issued outside the country in whose currency it is denominated
✔✔eurobond market is attractive because (3) - ✔✔-It lacks regulatory interference
-It has less stringent disclosure requirements than domestic bond markets
-It is more favorable from a tax perspective
✔✔why list stock in another country's exchange (4) - ✔✔-facilitate future stock swaps
-use stock to compensate
-satisfy local ownership desires
-increase company's visibility
✔✔when borrowing from the global capital market, the risk is - ✔✔adverse exchange
rate movements
✔✔Regional Economic Integration - ✔✔cooperation of nation states economically
✔✔list integration from least to most integrated - ✔✔free trade, customs union, common
market, economic union, full political union
✔✔free trade area - ✔✔all barriers are removed, each country allowed to create its own
barriers, tariffs vary (EFTA and NAFTA)
✔✔customs union - ✔✔eliminates trade barriers and adopts a common external trade
policy
✔✔common market - ✔✔no barriers to trade among member countries, includes a
common external trade policy, and allows factors of production to move freely among
members
✔✔economic union - ✔✔Free trade between member countries and common external
trade policy, free movement of production factors, and Common Currency, Tax Policy
Harmonization, Common Monetary and Fiscal Policy (plus cooperation do be hard tho)
✔✔political union - ✔✔a central political apparatus coordinates economic, social, and
foreign policy
