Q. 1Under the gold standard of currency exchange that existed from 1879 to 1914, an ounce of gold cost $20.67 in U.S. dollars and £4.2474 in British pounds. Therefore, the exchange rate of pounds per dollar under this fixed exchange regime was (a)£4.8665/$.
(c)always changing because the price of gold was always changing. (d)unknown because there is not enough information to answer this question.
Q. 2Which of the following investment strategies will allow me to make a profit if I anticipate that the value of the Euro, a currency that I do not own, is going to fall over the next 90 days and I am correct in my prediction? (a)Sell Euros short.
(b)Buy Euros short.
(c)Sell dollars short.
(d)Buy Euros long.
Q. 3In January 2002, the Argentine Peso changed in value from Peso1.00/$ to Peso1.40/$, thus, the Argentine Peso ___________ against the U.S. dollar. (a)strengthened
(d)All of the above
Q. 4Which of the following is NOT part of the Financial Account of the BOP? (a)Net foreign direct investment.
(b)Net imports/exports of services.
(c)Net portfolio investment.
(d)Other Financial items.
Q. 5The ___________ includes all international economic transactions with income or payment flows occurring within the year. (a)capital account
Q. 6Anaconda Copper Inc. created a subsidiary in Chile last year to mine copper ore. The proportion of net income paid back to the parent company as a dividend would be recorded in the current account subcategory of _______________. (a)services trade
Q. 7Which of the following would NOT be considered a direct investment either into or from the United States? (a)The purchase of U.S. Treasury (debt) securities.
(b)Ford Motor Company building an assembly plant in Mexico. (c)Honda of Japan building a manufacturing plant in Alabama. (d)Intel purchasing a chip manufacturing plant in Thailand.
Q. 8Under an international regime of fixed exchange rates, countries with a BOP ________ should consider ____________ their currency while countries with a BOP ____________ should consider ___________ their currency. (a)deficit, revaluing; surplus, revaluing
(b)deficit, devaluing; surplus, devaluing
(c)surplus, devaluing; deficit, revaluing
(d)surplus, revaluing; deficit, devaluing
Q. 9The _____________ is the difference between merchandise imports and exports and a measure of a country’s international trade in goods and services. (a)balance of payments
(d)balance of trade
Q. 10Exchange rate pass-through may be defined as
(a)the bid/ask spread on currency exchange rate transactions. (b)the degree to which the prices of imported and exported goods change as a result of exchange rate changes. (c)the PPP of lesser-developed countries.
(d)the practice by Great Britain of maintaining the relative strength of the currencies of the Commonwealth countries under the current floating exchange rate regime.
Q. 11The relationship between the percentage change in the spot exchange rate over time and the differential between comparable interest rates in different national capital markets is known as ___________________. (a)absolute PPP
(b)the law of one price
(d)the international Fisher Effect
Q. 12From the viewpoint of a U.S. investor or trader, the indirect quote for a...