International Finance Final Exam
questions n answers graded A+
When money can move freely across borders, policy makers must choose
between - correct answer ✔✔a fixed exchange rate and an independent monetary
policy
Gresham's Law states that - correct answer ✔✔Bad money drives good money
out of circulation
Nestle, a well-known Swiss corporation - correct answer ✔✔At one time placed
restrictions on foreign ownership of its stock. When it relaxed these restrictions,
there was a major transfer of wealth from foreign shareholders to swiss
shareholders.
Suppose you start with $100 and buy stock for 50 pounds when the exchange rate
is 1 pound = $2. One year later, the stock rises to 60 pound. You are happy with
you 20% return on the stock, but when you sell the stock and exchange your 60
pounds for dollars, you only get $45 since the pound has fallen to 1 pound = $.75.
This loss of value is an example of - correct answer ✔✔Exchange risk
The capital account includes - correct answer ✔✔All purchases and sales of assets
such as stocks, bonds, bank accounts, real estate, and businesses
One potential drawback of the gold standard is - correct answer ✔✔The world
economy can be subject to deflationary pressure due to the limited supply of
monetary gold
, Suppose that the pound is pegged to gold at 20 pound per ounce and the dollar is
pegged to gold at $35 per ounce. This implies an exchange rate of $1.75 per
pound. If the current market exchange rate is $1.60 per pound, how would take
advantage of this situation? - correct answer ✔✔Start with $350. Exchange the
dollars for pound at the current rate of $1.60 per pound pound. Buy gold with
pounds at 20 pounds per ounce. Convert the gold to dollars at $35 per ounce
If the interest rate rises in the US while other variables remain constant - correct
answer ✔✔Capital inflows into the US will increase
The international monetary system went through several distinct stages of
evolution. These stages are summarized, in alphabetic order as follows - correct
answer ✔✔Bimetallism
Classical Gold Standard
Interwar Period
Bretton Woods System
Flexible Exchange Rate Regime
The common monetary policy for the euro zone is now formulated by - correct
answer ✔✔The European Central Bank
Which of the following is not a benefit of classic gold standard - correct answer
✔✔Almost no deflation
Under the gold standard, international imbalances of payment will be corrected
automatically under the - correct answer ✔✔Price-specie-flow mechanism
questions n answers graded A+
When money can move freely across borders, policy makers must choose
between - correct answer ✔✔a fixed exchange rate and an independent monetary
policy
Gresham's Law states that - correct answer ✔✔Bad money drives good money
out of circulation
Nestle, a well-known Swiss corporation - correct answer ✔✔At one time placed
restrictions on foreign ownership of its stock. When it relaxed these restrictions,
there was a major transfer of wealth from foreign shareholders to swiss
shareholders.
Suppose you start with $100 and buy stock for 50 pounds when the exchange rate
is 1 pound = $2. One year later, the stock rises to 60 pound. You are happy with
you 20% return on the stock, but when you sell the stock and exchange your 60
pounds for dollars, you only get $45 since the pound has fallen to 1 pound = $.75.
This loss of value is an example of - correct answer ✔✔Exchange risk
The capital account includes - correct answer ✔✔All purchases and sales of assets
such as stocks, bonds, bank accounts, real estate, and businesses
One potential drawback of the gold standard is - correct answer ✔✔The world
economy can be subject to deflationary pressure due to the limited supply of
monetary gold
, Suppose that the pound is pegged to gold at 20 pound per ounce and the dollar is
pegged to gold at $35 per ounce. This implies an exchange rate of $1.75 per
pound. If the current market exchange rate is $1.60 per pound, how would take
advantage of this situation? - correct answer ✔✔Start with $350. Exchange the
dollars for pound at the current rate of $1.60 per pound pound. Buy gold with
pounds at 20 pounds per ounce. Convert the gold to dollars at $35 per ounce
If the interest rate rises in the US while other variables remain constant - correct
answer ✔✔Capital inflows into the US will increase
The international monetary system went through several distinct stages of
evolution. These stages are summarized, in alphabetic order as follows - correct
answer ✔✔Bimetallism
Classical Gold Standard
Interwar Period
Bretton Woods System
Flexible Exchange Rate Regime
The common monetary policy for the euro zone is now formulated by - correct
answer ✔✔The European Central Bank
Which of the following is not a benefit of classic gold standard - correct answer
✔✔Almost no deflation
Under the gold standard, international imbalances of payment will be corrected
automatically under the - correct answer ✔✔Price-specie-flow mechanism
