Deck 1: International Finance: Monetary Policy

Question 1

In balance of payments accounting, a credit entry for the home country is

A)an international transaction in which foreigners make payments to residents of the home country
B)one in which residents of the home country make payments for foreigners
C)one which results from an import of goods into the home country
D)one which results from an outflow of capital from the home country to a foreign country

Answer 1

an international transaction in which foreigners make payments to residents of the home country

Question 2

If the value of exports for a country is $35,500,000 and the value of imports is $35,000,000, the balance of trade can be described as

A)in surplus but unfavorable
B)showing a gain in real goods but in deficit
C)in deficit and favorable
D)in surplus, favorable and +$500,000

Answer 2

in surplus, favorable and +$500,000

Question 3

All of the following statements are explanations of the reason for short-term capital transfers from Country X to Country Y EXCEPT

A)Political instability in Country X
B)Lower interest rates in Country X
C)Lower interest rates in Country Y
D)Country X has made it known that it is considering devaluation of its currency

Answer 3

Lower interest rates in Country Y

Question 4

Multinational firms face exposure to many different types of international risk. Which of the following is not a type of exposure?

A)diversifiable risk
B)political risk
C)foreign economies
D)exchange rate movements

Question 5

A firms expects to receive $20,000 from domestic operations and 20,000 British pounds (£) from a business in England. If the pound's value is $1.25, the expected total dollar cash flows are:

A)$40,000
B)$36,000
C)$45,000
D)$20,000

Question 6

When an individual or firm in a particular country requests that a bank sell foreign exchange, the bank will probably

A)call a foreign bank and arrange a purchase.
B)call the central bank and arrange a purchase.
C)call another bank customer with foreign exchange holdings.
D)call another domestic bank and arrange a purchase.

Question 7

All else equal and under a system of floating exchange rates, if a country enters a period of exceptionally strong growth,

A)the pressure on its currency is to revalue.
B)the pressure on its currency is to devalue.
C)the pressure on its currency is to depreciate.
D)the pressure on its currency is to appreciate.

Question 8

Which of the following would likely have the least direct influence on a country's current account?

A)inflation.
B)national income.
C)exchange rates.
D)tariffs.

Question 9

Major functions of 'IMF' are

A)Oversea's arrangements of fixed exchange rate
B)providing short term capital
C)providing leadership on health matters
D)both a and b

Question 10

International Monetary Fund is classified as

A)intergovernmental organization
B)international organization
C)interregional organization
D)One state organization

Question 11

International Monetary Fund formal existence came into being in

A)12 May, 1945
B)27 July, 1945
C)27 December, 1945
D)27 September, 1945

Question 12

International Monetary Fund is headquartered in

A)Washington, United States
B)New York City, United States
C)Geneva, Switzerland
D)Avenue Du Mont Blanc, Switzerland

Question 13

How does the IMF meet its primary objective?

A)By promoting free international trade
B)By overseeing the balance of payments, acting as a forum of world negotiation and regulating world exchange rates
C)By acting as an arbitrator for the dispute settlement of world trade matters
D)By aligning its primary objective with the monetary objectives of national governments

Question 14

The eurocurrency market did not develop until the late 1950s because:

A)the countries of the Soviet bloc did not earn dollars in foreign trade until 1958.
B)European currencies were only convertible for non-residents before 1958.
C)the major European economies had not recovered sufficiently from the effects of World War II.
D)US banks were not permitted to open branches outside the USA until 1958.