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Question
Imperfect asset substitutability exists
A) when it is possible for the expected returns on two assets to be different.
B) when the expected returns on two assets are the same.
C) only when one asset is foreign and the other is domestic.
D) when there is risk in the foreign exchange market.
E) when assets are liquid.
Answer
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Related questions
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The Services sector has been steadily rising in relative importance in GDP of the United States, as well as elsewhere around the world. Since "services" have been identified as "non-tradable" (e.g., it is difficult to export haircuts), it may be argued that this trend will likely slow the rapid growth in international trade. Discuss.
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The Neoclassical Heckscher-Ohlin model assumes that all producers of any industrial product has knowledge of, and may avail itself of the same production technology available to producers in any other country. Many have flagged this identical technology assumption as unrealistic. During the past half century, the relative importance of Multinational Corporations (MNCs) in world trade has steadily increased. How would this trend affect the realism of the "identical technology" assumption?
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International monetary analysis focuses on
A) the real side of the international economy.
B) the international trade side of the international economy.
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D) the issues of international cooperation between Central Banks.
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For almost 70 years international trade policies have been governed
A) by the World Trade Organization.
B) by the International Monetary Fund.
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D) by an international treaty known as the General Agreement on Tariffs and Trade (GATT).
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Compare currency board to conventional fixed exchange rate.
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If a developing country institutes a currency board, it relinquishes control over having
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B) exchange rate stability.
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D) freedom of labor movement.
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A) the governments of many developing countries to guarantee repayment of all loans.
B) to higher growth rates in Latin America.
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What weakness in the economic structures of Asian countries contributed to the severe financial crisis that Asian economies experienced in 1997?
A) Productivity: It increased rapidly and the countries were victims of their own success
B) Banking regulation: Banks were excessively regulated, which reduced profits.
C) Legal Framework: The system dealt unsuccessfully with companies in financial trouble
D) Natural Resources: Countries' lack of natural resources and failure to explore developing industries accumulated and led to the crisis.
E) High Taxes: High rates of taxation resulted in a reliance on imports.
Q:
Futures contracts differ from forward contracts in that
A) future contracts ensures you will receive a certain amount of foreign currency at a specified future date.
B) future contracts bind you into your end of the deal.
C) future contracts allow you to sell your contract on an organized futures exchange.
D) future contracts are a disadvantage if your views about the future spot exchange rate are to change.
E) futures contracts don't allow you to realize a profit of a loss right away.
Q:
Which major actor is at the center of the foreign exchange market?
A) corporations
B) central banks
C) commercial banks
D) non-bank financial institutions
E) individual firms
Q:
Forward and spot exchange rates
A) are necessarily equal.
B) do not move closely together.
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In the year 2012, Shinzo Abe became prime minister of Japan, promising bold policies to improve Japan's economy. What was the focus of his policies and how did they affect Japan's trade position?
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Which one of the following statements is the MOST accurate?
A) A depreciation of a country's currency makes its goods cheaper for foreigners.
B) A depreciation of a country's currency makes its goods more expensive for foreigners.
C) A depreciation of a country's currency makes its goods cheaper for its own residents.
D) A depreciation of a country's currency makes its goods cheaper.
E) An appreciation of a country's currency makes its goods more expensive.
Q:
The Japanese currency is called the
A) DM.
B) Yen.
C) Euro.
D) Dollar.
E) Pound.
Q:
How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds if the exchange rate is 1.80 dollars per one British pound?
A) 40 dollars
B) 90 dollars
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Q:
How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds if the exchange rate is 1.50 dollars per one British pound?
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Discuss the effects of a rise in the dollar interest rate on the exchange rate.
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Which of the following can help to explain why higher inflation may lead to currency appreciations?
A) The interest rate is not the prime target of monetary policy.
B) Most central banks adjust their policy interest rates expressly so as to keep inflation in check.
C) Central banks increase the money supply leading to overshooting of the exchange rate.
D) Inflation will increase the purchasing power of a currency.
E) The world market does not adjust their currency trade to reflect inflation.
Q:
During hyperinflation, exploding inflation causes real money demand to
A) fall over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises.
B) increase over time, and this additional monetary change makes money prices rise even more quickly than the money supply itself rises.
C) fall over time, and this additional monetary change makes money prices decrease even more quickly than the money supply itself rises.
D) increase over time, and this additional monetary change makes money prices decrease even more quickly than the money supply itself rises.
E) fall over time, and this additional monetary change makes money prices decrease even less quickly than the money supply itself rises.
Q:
Money demand behavior may
A) change as a result of demographic trends or financial innovations such as electronic cash-transfer facilities.
B) change only as a result of demographic trends.
C) change only as a result of financial innovations such as electronic cash-transfer facilities.
D) not change as a result of demographic trends or financial innovations such as electronic cash-transfer facilities.
E) change as a result of demographic trends but not as a result of financial innovations such as electronic cash-transfer facilities.
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Analyze the effects of an increase in the European money supply on the dollar/euro exchange rate.
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If individuals are holding more money than they desire
A) they will attempt to reduce their liquidity by using money to purchase goods.
B) they will attempt to reduce their liquidity by using money to purchase interest-bearing assets.
C) they will attempt to reduce their liquidity by converting real money holdings into nominal money holdings.
D) they will keep their holdings constant.
Q:
Which one of the following statements is the MOST accurate?
A) A rise in the average value of transactions carried out by a household or a firm causes its demand for money to fall.
B) A reduction in the average value of transactions carried out by a household or a firm causes its demand for money to rise.
C) A rise in the average value of transactions carried out by a household or a firm causes its demand for money to rise.
D) A rise in the average value of transactions carried out by a household or a firm causes its demand for real money to rise.
E) a decrease in the average value of transactions carried out by a household or a firm causes its demand for real money to rise.
Q:
In the interest rate parity condition with imperfect substitutes and a risk premium of ρ
A) an increased stock of domestic government debt will raise the difference between the expected returns on domestic and foreign currency bonds.
B) a decreased stock of domestic government debt will raise the difference between the expected returns on domestic and foreign currency bonds.
C) an increased stock of domestic government debt will reduce the difference between the expected returns on domestic and foreign currency bonds.
D) an increased stock of domestic government debt will have no effect on the difference between the expected returns on domestic and foreign currency bonds.
E) a decreased stock of domestic government debt will have no effect on the difference between the expected returns on domestic and foreign currency bonds.