Question 1

Explain the differences between the international monetary system and the International Monetary Fund. What are the three major types of crises most frequently addressed by the International Monetary Fund?

Accepted Answer

The answer of Explain the differences between the international monetary...

Question 2

________ are mangers of pensions and mutual funds, as well as insurance companies who have assumed an enormous role in driving capital markets around the world.
A)Entrepreneurs
B)Institutional investors
C)Angel investors
D)Venture capitalists

Accepted Answer

Institutional investors are the managers of pensions, mutual funds, and insurance companies who have a significant role in driving capital markets worldwide. They invest on behalf of their clients, which could be individuals, corporations, or governments.

Question 3

Which of the following situations often results in a banking crisis?
A)when investors withdraw funds from financial institutions
B)when exchange rates fluctuate dramatically
C)when governments borrow excessively from banks
D)when a nation's currency rapidly depreciates

Accepted Answer

When investors withdraw funds from financial institutions, it can cause a liquidity crisis which may lead to a banking crisis. Banks may not have enough reserves to meet withdrawal requests, prompting panic among depositors and further withdrawals. This can cause a chain reaction leading to the collapse of the entire financial system.

Question 4

Describe the two main types of foreign exchange management used today. Provide examples of nations which use each type of system. What are the benefits of each system?

Accepted Answer

The answer of Describe the two main types of foreign...

Question 5

Expert A most likely works for which of the following?
A)Union Bank in Switzerland
B)Bank of America
C)Arab-Malaysian Merchant Bank
D)Goldman Sachs

Accepted Answer

The answer of Expert A most likely works for which...

Question 6

The employer of Expert B can most likely be categorized as which of the following?
A)investment bank
B)private bank
C)commercial bank
D)offshore bank

Accepted Answer

The Bank of Nova Scotia in the British Virgin Islands, as described for Expert B, fits the definition of an offshore bank, which operates in a jurisdiction that offers financial and legal advantages, such as privacy, reduced or no taxation, and protection against local political or financial instability.

Question 7

Which of the following statements is true of the global financial system?
A)It consists of the institutional frameworks, rules, and procedures that govern how national currencies are exchanged for one another.
B)It includes key players such as finance ministries and national stock exchanges but excludes commercial banks and central banks.
C)It is built on the activities of firms, banks, and financial institutions engaged in ongoing international financial activity.
D)Since the 1960s, the volume and structure of the global financial system has been reducing.

Accepted Answer

The global financial system is built on the activities of firms, banks, and financial institutions engaged in ongoing international financial activity. This includes commercial banks and central banks, as well as finance ministries and national stock exchanges. Option A is incorrect because it only refers to currency exchange, whereas the global financial system encompasses more than just exchange rates. Option D is also incorrect as the global financial system has been expanding since the 1960s, not decreasing.

Question 8

Which of the following levels of the global monetary and financial systems pyramid includes commercial banks?
A)national government level
B)national infrastructure level
C)international organization level
D)firm level

Accepted Answer

Commercial banks are part of the national infrastructure level of the global monetary and financial systems pyramid, as they are primarily supervised by national regulators and operate within the domestic economy. The national government level refers to central banks and other government institutions responsible for monetary policy, while the international organization level refers to entities such as the International Monetary Fund and the World Bank. The firm level refers to individual companies operating within the global financial system.

Question 9

Describe four principles or organizations brought about by the Bretton Woods Agreement that remain important to international business and trade today. Why does the integration of financial and monetary activity worldwide continue to grow?

Accepted Answer

The answer of Describe four principles or organizations brought about...

Question 10

Which of the following best describes the role that the international monetary system plays with foreign firms?
A)underwrite stock and bond issues and give advice on mergers
B)establishes regulations for FDI financing
C)oversees finance and trade in developing nations
D)provides a framework for monetary and foreign exchange activities worldwide

Accepted Answer

The international monetary system provides a framework for monetary and foreign exchange activities worldwide, including setting exchange rates and facilitating international trade and investment transactions. It does not directly underwrite stock and bond issues or regulate FDI financing or finance and trade in developing nations.

Question 11

A ________ is a facility for trading securities and other financial instruments, including shares issued by companies, trust funds, pension funds, and corporate and government bonds.
A)stock exchange
B)business strategic unit
C)grey market
D)shell corporation

Accepted Answer

A stock exchange is specifically designed for trading securities and other financial instruments. Business strategic units refer to subdivisions within a larger company, while the grey market and shell corporations are not related to trading securities.

Question 12

The integration of international financial and monetary activity can be attributed to the growing role of single-currency systems, such as the euro.

Accepted Answer

The introduction of the euro has led to increased integration in financial and monetary activity, as countries within the Eurozone now share a common currency and economic policies. This has encouraged trade and investment between these countries, contributing to a larger and more interconnected global market.

Question 13

The global financial system establishes the rules and procedures for exchanging national currencies in international business transactions.

Accepted Answer

The answer of The global financial system establishes the rules...

Question 14

The International Monetary Fund is part of the global financial system.

Accepted Answer

The International Monetary Fund (IMF) is a specialized agency of the United Nations that is part of the global financial system. It works to promote international monetary cooperation, facilitate international trade, and promote economic growth around the world.

Question 15

Which of the following would a firm considering a corporate merger consult for issues related to the merger?
A)private bank
B)offshore bank
C)commercial bank
D)investment bank

Accepted Answer

Investment banks specialize in assisting with corporate mergers and acquisitions, providing services such as valuations, negotiations, and financing options. Private, offshore, and commercial banks typically do not have the same level of expertise in this area.

Question 16

Which of the following, originally known as the International Bank for Reconstruction and Development, was founded to fund construction of Japan and Europe after World War II?
A)The International Monetary Fund
B)The Financial Stability Board
C)The World Bank
D)Bank for International Settlements

Accepted Answer

The World Bank, originally known as the International Bank for Reconstruction and Development, was founded to fund the reconstruction efforts of Japan and Europe after World War II. The International Monetary Fund (IMF) focuses on international monetary cooperation, exchange rate stability, and providing resources to countries in need, but it did not play a role in financing the reconstruction efforts after World War II. The Financial Stability Board and the Bank for International Settlements are also not involved in funding reconstruction efforts.

Question 17

Which of the following is a characteristic of a bond?
A)It is a short-term loan from a commercial bank.
B)It refers to capital raised by selling corporate shares.
C)It refers to a debt security used to raise capital.
D)It is a debt instrument on which dividends are paid.

Accepted Answer

A bond is a debt security used to raise capital.

Question 18

Investment banks underwrite (guarantee the sale of)stock and bond issues and advise on mergers.

Accepted Answer

Investment banks commonly underwrite stock and bond issues and provide advice on mergers.

Question 19

Expert C most likely works for which of the following?
A)Merrill Lynch
B)Banco General in Panama
C)Federal Reserve Bank
D)International Monetary Fund

Accepted Answer

The answer of Expert C most likely works for which...

Question 20

Explain why international financial and monetary activities are becoming more integrated. What are the risks and benefits of the growing integration of the two activities?

Accepted Answer

The answer of Explain why international financial and monetary activities...

Quiz 9: The International Monetary and Financial Environment

Explain the differences between the international monetary system and the International Monetary Fund. What are the three major types of crises most frequently addressed by the International Monetary Fund?

________ are mangers of pensions and mutual funds, as well as insurance companies who have assumed an enormous role in driving capital markets around the world.

Which of the following situations often results in a banking crisis?

Describe the two main types of foreign exchange management used today. Provide examples of nations which use each type of system. What are the benefits of each system?

Expert A most likely works for which of the following?

The employer of Expert B can most likely be categorized as which of the following?

Which of the following statements is true of the global financial system?

Which of the following levels of the global monetary and financial systems pyramid includes commercial banks?

Describe four principles or organizations brought about by the Bretton Woods Agreement that remain important to international business and trade today. Why does the integration of financial and monetary activity worldwide continue to grow?

Which of the following best describes the role that the international monetary system plays with foreign firms?

A ________ is a facility for trading securities and other financial instruments, including shares issued by companies, trust funds, pension funds, and corporate and government bonds.

The integration of international financial and monetary activity can be attributed to the growing role of single-currency systems, such as the euro.

The global financial system establishes the rules and procedures for exchanging national currencies in international business transactions.

The International Monetary Fund is part of the global financial system.

Which of the following would a firm considering a corporate merger consult for issues related to the merger?

Which of the following, originally known as the International Bank for Reconstruction and Development, was founded to fund construction of Japan and Europe after World War II?

Which of the following is a characteristic of a bond?

Investment banks underwrite (guarantee the sale of)stock and bond issues and advise on mergers.

Expert C most likely works for which of the following?

Explain why international financial and monetary activities are becoming more integrated. What are the risks and benefits of the growing integration of the two activities?