Sample exam questions – Financial Environment
All questions must be answered in relation to your chosen organization and/or its industry sector as defined in your ‘organization/ industry profile’. These are ‘short-answer questions so think about how much you can write in 15-20 minutes. The marking scheme awards marks for relevance, application and originality so avoid irrelevance, generality and unoriginality.
1. Consider exchange rates for your country’s currency against that of its main trading partner over the last 10 years. What trends can you see and how might these trends affect your chosen firm and/or industry? [see http://www.x-rates.com]
2. In relation to exchange rates what is meant by the ‘law of one price’. To what extent might it affect your chosen firm and/or industry?
3. If a basket of goods has been found to cost US$300 in New York, and 30,000 yen in Tokyo. What is the PPP yen/dollar exchange rate? If the actual exchange rate is 130 yen/dollar what would you expect to happen to that exchange rate in the future? (Feel free to adapt this question to you own currency and that of your most important trading partner.)
4. Briefly explain why and how money supply, inflation and exchange rates are important to your chosen firm and/or industry.
5. Different countries run different exchange rate regimes for their currencies. What is the exchange rate regime for your country? Compared to the alternatives, what are the advantages and disadvantages of this exchange rate regime for your organization and/or industry?
6. Consider the creation of the Euro currency. What are the advantages and/or disadvantages of the Euro for your chosen organization and/or industry?
7. Consider the 2008/09 financial and economic crisis. What were its effects and, in particular, what were its effects, if any, on your chosen organization or industry?
8. Inflation is generally considered to be damaging to international competitiveness. What measures can...
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