1) Which of the following was created in an effort to promote free trade? A) World Trade Organization
B) the Sarbanes-Oxley Act
C) multilateral development banks
D) the Organization for Economic Cooperation and Development Answer: A
2) What is the name for the shifting of non-strategic functions to specialist firms to reduce costs? A) outsourcing
B) multinational company
D) transnational corporations
3) The World Bank's main goal is to ensure the stability of
A) the international monetary and financial system only in developed countries. B) the international monetary and financial system in developing countries. C) the international monetary and financial system in both developed and developing countries. D) only the financial system in both developed and developing countries. Answer: C
4) Between 2007 and 2010 the world witnessed a full-blown financial crisis that was attributed to A) subprime mortgage repricing.
B) quantitative easing by the Fed.
C) foreign exchange imbalances.
D) banking failures.
5) Which of the following is NOT a protectionist tendency?
B) comparative advantage
C) non-tariff barriers
6) It is the right given to firms to produce specific products in exchange for a ________ fee. A) Joint Venture
7) Which one of the following provides a specialized sales or service strategy, offers support at various levels, and occasionally invests in the firm in exchange for periodic fees? A) joint venture
8) ________ is a company that is commonly owned and operated by two or more firms. A) Joint Venture
9) What is the name of the international organization that was founded to ensure the stability of the international system of payments and exchange rates among national currencies? A) The International Monetary Fund
B) The World Bank
C) The World Trade Organization
D) The International Finance Corporation
10) The main resources of the International Monetary Fund are provided by A) the members of the World Bank.
B) its member countries primarily through payments of quotas. C) members of the Organization for Economic Cooperation and Development. D) the Bank for International Settlements.
11) What is the name for an organization that invests a large pool of money on behalf of another organization such as a bank, insurance company, or a retirement fund? A) hedge fund
B) private equity firm
C) institutional investor
D) mutual fund
12) In 1992, the European Union decided to create an economic as well as a monetary union involving the introduction of A) a pegged currency known as the euro.
B) a managed currency know as the ecu.
C) a freely floating exchange rate for a currency known as the euro. D) a single European currency managed by a European central bank. Answer: D
13) What is the name of the international organization that fosters monetary and financial cooperation and serves as a bank for central banks? A) WTO
C) World Bank
D) Bank for International Settlements
Chapter 2 The Foreign Exchange Market
14) When someone in the currency market can buy a currency at a low price and sell it simultaneously for a higher price, it is known as ________. A) arbitrage
B) the bid-ask spread
D) interbank currency market
15) What is the largest financial market in the world measured in dollar-volume trade? A) the U.S. stock markets
B) the currency markets
C) the forward and swap currency markets
D) the global market for loanable funds
16) What do the market makers in the currency markets provide? A) insurance against default by the buyers