Test Bank for International Financial Management 13th Edition By Jeff Madura Chapter 6

INSTANT DOWNLOAD WITH ANSWERS International Financial Management 13th Edition By Jeff Madura – Test Bank Chapter 6 1. To force the value of the pound to appreciate against the dollar, the Federal Reserve should: a. sell dollars for pounds in the foreign exchange market and the European Central Bank (ECB) should sell dollars for pounds in the foreign exchange market. c. sell pounds for dollars in the foreign exchange market and the European Central Bank (ECB) should not intervene. d. sell dollars for pounds in the foreign exchange market and the European Central Bank (ECB) should sell pounds for dollars in the foreign exchange market. ANSWER: a POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: INFM.MADU.15.06.02 NATIONAL STANDARDS: United States – BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States – OH – DISC.INFM.MADU.15.02 KEYWORDS: Bloom’s: Comprehension 2. A weak dollar is normally expected to cause: a. high unemployment and high inflation in the U.S. b. high unemployment and low inflation in the U.S. ANSWER: d POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: INFM.MADU.15.06.04 NATIONAL STANDARDS: United States – BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States – OH – DISC.INFM.MADU.15.02 KEYWORDS: Bloom’s: Comprehension 3. A strong dollar is normally expected to cause: a. high unemployment and high inflation in the U.S. b. high unemployment and low inflation in the U.S. c. low unemployment and low inflation in the U.S. d. low unemployment and high inflation in the U.S. ANSWER: b NATIONAL STANDARDS: United States – BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States – OH – DISC.INFM.MADU.15.02 KEYWORDS: Bloom’s: Comprehension 4. To force the value of the British pound to depreciate against the dollar, the Federal Reserve should: a. sell dollars for pounds in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market. b. sell pounds for dollars in the foreign exchange market and the Bank of England should sell dollars for pounds in the foreign exchange market. c. sell pounds for dollars in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market. d. sell dollars for pounds in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market. ANSWER: c NATIONAL STANDARDS: United States – BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States – OH – DISC.INFM.MADU.15.02 KEYWORDS: Bloom’s: Comprehension 5. Consider two countries that trade with each other, called X and Y. According to the text, inflation in Country X will have a greater impact on inflation in Country Y under the system. Now, consider two other countries that trade with each other, called A and B. Unemployment in Country A will have a greater impact on unemployment in Country B under the system. a. floating rate; fixed rate b. floating rate; floating rate c. fixed rate; fixed rate d. fixed rate; floating rate ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: INFM.MADU.15.06.01 KEYWORDS: Bloom’s: Comprehension 6. A primary result of the Bretton Woods Agreement was: a. the establishment of the European Monetary System (EMS). b. establishing specific rules for when tariffs and quotas could be imposed by governments. c. establishing that exchange rates of most major currencies were to be allowed to fluctuate 1% above or below their initially set values. d. establishing that exchange rates of most major currencies were to be allowed to fluctuate freely without boundaries (although the central banks did have the right to intervene when necessary). ANSWER: c POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: INFM.MADU.15.06.01 NATIONAL STANDARDS: United States – BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States – OH – DISC.INFM.MADU.15.02 KEYWORDS: Bloom’s: Knowledge 7. A primary result of the Smithsonian Agreement was: a. the establishment of the European Monetary System (EMS). b. establishing that exchange rates of most major countries were to be allowed to fluctuate 2.25% above or below their initially set values. c. establishing specific rules for when tariffs and quotas could be imposed by governments. d. establishing that exchange rates of most major currencies were to be allowed to fluctuate freely without boundaries (although the central banks did have the right to intervene when necessary). ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: INFM.MADU.15.06.01 NATIONAL STANDARDS: United States – BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States – OH – DISC.INFM.MADU.15.02 KEYWORDS: Bloom’s: Knowledge 8. Under a fixed exchange rate system: necessary. c. central bank intervention in the foreign exchange market is often necessary. d. central bank intervention in the foreign exchange market is not allowed. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: INFM.MADU.15.06.01 NATIONAL STANDARDS: United States – BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States – OH – DISC.INFM.MADU.15.02 KEYWORDS: Bloom’s: Knowledge 9. Under a managed float exchange rate system, the Fed may attempt to stimulate the U.S. economy by the dollar. Such an adjustment in the dollar’s value should the U.S. demand for products produced by major foreign countries. a. weakening; increase d. strengthening; decrease ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: INFM.MADU.15.06.01 NATIONAL STANDARDS: United States – BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States – OH – DISC.INFM.MADU.15.02 KEYWORDS: Bloom’s: Comprehension 10. The value of the Canadian dollar, Japanese yen, and Australian dollar with respect to the U.S. dollar are part of a: a. pegged system. b. fixed system. c. managed float system. d. crawling peg system. DIFFICULTY: Easy LEARNING OBJECTIVES: INFM.MADU.15.06.01 NATIONAL STANDARDS: United States – BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States – OH – DISC.INFM.MADU.15.02 KEYWORDS: Bloom’s: Knowledge 11. The interest rate of a country with a currency board: a. is less stable than it would be without a currency board. b. is typically below the interest rate of the currency to which it is tied. c. will move in tandem with the interest rate of the currency to which it is tied. d. is completely independent of the interest rate of the currency to which it is tied. ANSWER: c POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: INFM.MADU.15.06.01