International Finance Exam 3
questions n answers
The degree of political risk faced by a firm operating in a foreign country - correct answer
✔✔depends on how the firm has structured its operations
One good indicator of political risk is - correct answer ✔✔the seriousness of capital flight
Capital flight occurs for several reasons, most of which have to do with - correct answer
✔✔inappropriate economic policies
Expropriation or creeping expropriation is most likely in the ------ sector of an economy - correct
answer ✔✔extractive
The great economic lesson of the ill-fated, post-World War II experiment in Communism is that
_________ work and command economies do not - correct answer ✔✔centralized economic
controls
A large government deficit relative to GDP, a high rate of money expansion accompanied by
fixed exchange rates, along with substantial government expenditures are some of the common
characteristics of _________ risk. - correct answer ✔✔country
A structure of incentives that rewards risk taking in productive ventures is an indicator of long-
run _____________ health for a country - correct answer ✔✔economic
The state's best strategy is to provide basic _________ in order to promote economic growth. -
correct answer ✔✔economic and political stability
, What ultimately determines a nation's ability to repay foreign loans is its ability to generate
___________ - correct answer ✔✔hard currencies
The economic experiences of Mexico, Chile, and Argentina in the recent past show that they all
possessed a_________. - correct answer ✔✔a head of state who demonstrates strong will and
leadership
When investing in a natural resource project, a foreign mining firm can add value to the project
by doing all of the following EXCEPT - correct answer ✔✔ignoring safety conditions in the local
plant
During the 1980s many Latin American countries believed in a policy that economic growth was
best promoted by extensive state ownership which led to - correct answer ✔✔capital flight
Which one of the following is a tough-minded economic policy that may halt capital flight? -
correct answer ✔✔removing barriers to investment by foreigners
An oil company can manage its political risk in Nigeria by all of the following EXCEPT - correct
answer ✔✔siding with the political establishment regardless of public opinion
Political risk is primarily a function of the following but NOT - correct answer ✔✔the degree of
centralization practiced by the MNC in country
Which one of the following is NOT a form of political risk to the multinational corporation? -
correct answer ✔✔privatization of public utilities
Which one of the following is NOT a measure of political instability? - correct answer ✔✔the
number of political parties
questions n answers
The degree of political risk faced by a firm operating in a foreign country - correct answer
✔✔depends on how the firm has structured its operations
One good indicator of political risk is - correct answer ✔✔the seriousness of capital flight
Capital flight occurs for several reasons, most of which have to do with - correct answer
✔✔inappropriate economic policies
Expropriation or creeping expropriation is most likely in the ------ sector of an economy - correct
answer ✔✔extractive
The great economic lesson of the ill-fated, post-World War II experiment in Communism is that
_________ work and command economies do not - correct answer ✔✔centralized economic
controls
A large government deficit relative to GDP, a high rate of money expansion accompanied by
fixed exchange rates, along with substantial government expenditures are some of the common
characteristics of _________ risk. - correct answer ✔✔country
A structure of incentives that rewards risk taking in productive ventures is an indicator of long-
run _____________ health for a country - correct answer ✔✔economic
The state's best strategy is to provide basic _________ in order to promote economic growth. -
correct answer ✔✔economic and political stability
, What ultimately determines a nation's ability to repay foreign loans is its ability to generate
___________ - correct answer ✔✔hard currencies
The economic experiences of Mexico, Chile, and Argentina in the recent past show that they all
possessed a_________. - correct answer ✔✔a head of state who demonstrates strong will and
leadership
When investing in a natural resource project, a foreign mining firm can add value to the project
by doing all of the following EXCEPT - correct answer ✔✔ignoring safety conditions in the local
plant
During the 1980s many Latin American countries believed in a policy that economic growth was
best promoted by extensive state ownership which led to - correct answer ✔✔capital flight
Which one of the following is a tough-minded economic policy that may halt capital flight? -
correct answer ✔✔removing barriers to investment by foreigners
An oil company can manage its political risk in Nigeria by all of the following EXCEPT - correct
answer ✔✔siding with the political establishment regardless of public opinion
Political risk is primarily a function of the following but NOT - correct answer ✔✔the degree of
centralization practiced by the MNC in country
Which one of the following is NOT a form of political risk to the multinational corporation? -
correct answer ✔✔privatization of public utilities
Which one of the following is NOT a measure of political instability? - correct answer ✔✔the
number of political parties
