FINA 4500 Quiz 1&2 with 100% Correct
Answers
Most sovereign nations make it difficult for people to cross their borders illegally. This
barrier to the free movement of labor is an example of
A) excessive transactions costs.
B) a market imperfection.
C) racial discrimination.
D) information asymmetry
a market imperfection.
Under a purely flexible exchange rate system
A. supply and demand set the exchange rates.
B. governments can set the exchange rate by buying or selling reserves.
C. governments can set exchange rates with fiscal policy.
D. governments can set the exchange rate by buying or selling reserves and with fiscal
policy.
supply and demand set the exchange rates.
According to the "Trilemma" a country can attain only two of the following three
conditions: (1) A fixed exchange rate, (2) free international flows of capital, and (3) an
independent monetary policy. This difficulty is also known as
A. the Tobin tax.
B. none of the options
C. the incompatible trinity.
D. the Iron Triangle.
the incompatible trinity.
, In David Ricardo's theory of comparative advantage,
A. is a short-run argument, not a long-run argument.
B. has been superseded by the now-orthodox view of mercantilism.
C. international trade is a zero-sum game in which one trading partner's gain comes at
the expense of another's loss.
D. liberalization of international trade will enhance the welfare of the world's citizens.
liberalization of international trade will enhance the welfare of the world's citizens.
A floating exchange rate is:
A. involves the confirmation of the country authorities' de jure exchange rate
arrangement.
B. where the exchange rate is largely market determined without an ascertainable or
predictable path for the rate.
C. when a country formally pegs its currency at a fixed rate to another currency or
basket of currencies where the basket reflects the geographic distribution of trade,
services, or capital flows.
D. where the exchange rate remains within a narrow margin of 2 percent relative to a
statistically identified trend for six months or more, and the exchange rate arrangement
cannot be considered as floating.
where the exchange rate is largely market determined without an ascertainable or predictable
path for the rate.
The Mexican Peso Crisis was touched off by
A. an unexpected announcement by the Mexican government to devalue the peso
against the dollar by 14 percent.
B. an announcement by the Mexican government to enact a currency board
Answers
Most sovereign nations make it difficult for people to cross their borders illegally. This
barrier to the free movement of labor is an example of
A) excessive transactions costs.
B) a market imperfection.
C) racial discrimination.
D) information asymmetry
a market imperfection.
Under a purely flexible exchange rate system
A. supply and demand set the exchange rates.
B. governments can set the exchange rate by buying or selling reserves.
C. governments can set exchange rates with fiscal policy.
D. governments can set the exchange rate by buying or selling reserves and with fiscal
policy.
supply and demand set the exchange rates.
According to the "Trilemma" a country can attain only two of the following three
conditions: (1) A fixed exchange rate, (2) free international flows of capital, and (3) an
independent monetary policy. This difficulty is also known as
A. the Tobin tax.
B. none of the options
C. the incompatible trinity.
D. the Iron Triangle.
the incompatible trinity.
, In David Ricardo's theory of comparative advantage,
A. is a short-run argument, not a long-run argument.
B. has been superseded by the now-orthodox view of mercantilism.
C. international trade is a zero-sum game in which one trading partner's gain comes at
the expense of another's loss.
D. liberalization of international trade will enhance the welfare of the world's citizens.
liberalization of international trade will enhance the welfare of the world's citizens.
A floating exchange rate is:
A. involves the confirmation of the country authorities' de jure exchange rate
arrangement.
B. where the exchange rate is largely market determined without an ascertainable or
predictable path for the rate.
C. when a country formally pegs its currency at a fixed rate to another currency or
basket of currencies where the basket reflects the geographic distribution of trade,
services, or capital flows.
D. where the exchange rate remains within a narrow margin of 2 percent relative to a
statistically identified trend for six months or more, and the exchange rate arrangement
cannot be considered as floating.
where the exchange rate is largely market determined without an ascertainable or predictable
path for the rate.
The Mexican Peso Crisis was touched off by
A. an unexpected announcement by the Mexican government to devalue the peso
against the dollar by 14 percent.
B. an announcement by the Mexican government to enact a currency board
