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Q:
Inflation is a result of the supply and demand for a currency.
Q:
Predictable exchange rates increase the need for currency hedging.
Q:
As the unpredictability of exchange rates increases, so does the cost of insuring against the accompanying risk.
Q:
In order to capture the gains from currency translation, managers prefer exchange rates that are volatile and unpredictable.
Q:
Currency devaluation increases consumers' buying power.
Q:
Devaluation lowers the price of a country's exports in the global market and increases the price of its imports.
Q:
The intentional lowering of the value of a currency by a nation's government is called revaluation.
Q:
Translating subsidiary earnings from a strong host currency into a weak home currency increases stated earnings in the home currency.
Q:
A company can improve its profits by selling in a country with a strong currency and sourcing from a country with a weak currency.
Q:
Sam's mentor at the firm told him that the ________ stipulates that an identical product must have an identical price in all countries when the price is expressed in a common currency.
A) exchange price
B) law of one price
C) fixed exchange-rate system
D) floating exchange-rate system
Q:
Sam already knows that the ________ tells us how much of one currency we must pay to receive a certain amount of another.
A) exchange rate
B) par value
C) law of one price
D) purchasing power parity theory
Q:
Which of the following forecasting techniques employs charts of past trends in currency prices and other factors to forecast exchange rates?A) financial analysisB) fundamental analysisC) value chain analysisD) technical analysis
Q:
Which of the following forecasting techniques employs statistical models based on key economic indicators to forecast exchange rates?
A) financial analysis
B) fundamental analysis
C) probability bounds analysis
D) technical analysis
Q:
The inefficient market view holds that prices of financial instruments ________.
A) are dependent on political efficiency
B) are not dependent on political efficiency
C) do not reflect all publicly available information
D) reflect all publicly available information at any given time
Q:
The exchange rate at the beginning of a year between the Indian Rupee (R) and the U.S. dollar is R43.125/$. The annual inflation rates in India and in the United States are 19 percent and 3 percent respectively. What would be the new exchange rate at the end of the year?
A) R49.8224/$
B) R37.327/$
C) R0.0267/$
D) $37.327/R
Q:
To cool off an inflationary economy, a government might ________.
A) lower interest rates
B) raise interest rates
C) lower foreign exchange rates
D) raise foreign exchange rates
Q:
The lowering of taxes in the U.S. by its government is an example of the ________.
A) fiscal policy
B) monetary policy
C) social policy
D) foreign affairs policy
Q:
The French government buying its own securities on the open market is part of the ________ of France.
A) fiscal policy
B) monetary policy
C) industrial policy
D) investment policy
Q:
________ is an activity under the monetary policy of a nation.
A) Increasing taxes
B) Lowering taxes
C) Increasing government spending
D) Selling government securities
Q:
Which of the following is true of inflation?
A) It occurs when money is injected into an economy that is experiencing greater output.
B) It is the result of supply and demand for a currency.
C) It increases people's purchasing power.
D) It is not particularly affected by the unemployment in a country.
Q:
Which of the following is the intentional lowering of a currency's value by its government?
A) revaluation
B) devaluation
C) currency hedging
D) currency arbitrage
Q:
A company selling in a country with a strong currency while sourcing from a country with a weak currency ________.
A) practices unethical conduct
B) experiences a trade deficit
C) ends up bankrupt
D) improves its profits
Q:
When a country's currency is weak, the price of its ________.
A) exports and imports on world markets declines
B) exports and imports on world markets increases
C) exports on world markets declines and the price of its imports increases
D) exports on world markets increases and the price of its imports declines
Q:
Explain how a pegged exchange-rate system works. Why would a country choose to follow this system?
Q:
A government with a currency board is legally bound to hold an amount of foreign currency that is at least equal to the amount of domestic currency.
Q:
Which of the following is most likely to occur in the honeymoon stage of culture shock?
A) new arrivals are fascinated by aspects of the new culture
B) individuals become annoyed by unpredictable quirks of the new culture
C) emotions hit rock bottom for visitors
D) visitors better understand and appreciate local customs and behavior
Q:
Today's international monetary system remains in large part a managed float system.
Q:
Why do governments impose currency restrictions and how can companies get around such restrictions?
Q:
Which of the following is a reason why there are only a few managers who are ready and willing to go to foreign branches on short notice?
A) expatriate failure
B) decruitment
C) culture shock
D) social loafing
Q:
What is currency speculation? Why do some governments protect their markets from currency speculation?
Q:
An expatriate manager who returns after a few years from an overseas assignment to find that there is no position for him in his home country office experiences a(n) ________.
A) reverse culture shock
B) expatriate failure
C) cognitive dissonance
D) assimilation effect
Q:
Briefly describe the three main institutions of the foreign exchange market.
Q:
The psychological process of readapting to one's home culture after working in a host-country culture is called ________.
A) social loafing
B) assimilation effect
C) reverse culture shock
D) expatriate failure
Q:
Differentiate between currency speculation and currency arbitrage.
Q:
Which of the following is a psychological process affecting employees living abroad and is characterized by homesickness, irritability, confusion, aggravation, and depression?
A) social loafing
B) groupthink
C) culture shock
D) halo effect
Q:
One goal of currency restriction is to preserve hard currencies to pay for imports and to finance trade deficits.
Q:
The early return by an employee from an international assignment because of inadequate job performance is called ________.
A) culture shock
B) decruitment
C) reverse culture shock
D) expatriate failure
Q:
A convertible currency is traded freely in the foreign exchange market with its price determined by London banks.
Q:
The process of screening and hiring the best-qualified applicants with the greatest performance potential is called ________.
A) performance appraisal
B) orientation
C) recruitment
D) selection
Q:
All foreign exchange transactions can be performed in the over-the-counter (OTC) market.
Q:
Companies typically recruit ________ to train individuals placed in more demanding nonmanagerial positions at foreign branches.
A) workers from the local market
B) recent college graduates from the host country
C) qualified third-party nationals
D) specialists from the home country
Q:
ABC Software has had difficulty obtaining funds to expand. A friend of the CEO recommends that the company should explore an offshore financial center, which ________.
A) is a country or territory whose financial sector features very few regulations and few, if any, taxes
B) tends to be characterized by political and economic instability making, it is an inexpensive but risky source of funds
C) typically lends money to companies that have had difficulty getting financing elsewhere because of poor credit records
D) is a financial center located in a resort community and is characterized by poor telecommunications infrastructure
Q:
________ would most likely be recruited for nonmanagerial positions at foreign subsidiaries that do not require specialized skills.
A) Recent graduates from colleges in the home country
B) Home-country specialists
C) Workers from the local host-country market
D) Current employees from the company headquarters
Q:
When doing business with former communist countries, Trader's Paradise insists on getting paid in a currency that can be traded freely in the foreign exchange market. The price of this currency is determined by the forces of supply and demand. Which of the following is the mode of payment illustrated in this scenario?A) community currencyB) private currencyC) local currencyD) convertible currency
Q:
To help speed up the process of getting approvals for local operations, a firm would most likely benefit from hiring ________.
A) home-country managers from the company's headquarters
B) managerial talent from the host country
C) recent college graduates trained in the home country
D) third-country expatriates with extensive experience in the field
Q:
If Trader's Paradise purchases euros expecting the value to rise and generate a profit for the company, it is engaging in currency ________.
A) swap
B) speculation
C) hedging
D) arbitrage
Q:
If Trader's Paradise purchases and sells the euros simultaneously in different markets for profit, it would be engaging in currency ________.
A) swap
B) speculation
C) hedging
D) arbitrage
Q:
Which of the following terms is defined as the process of identifying and attracting a qualified pool of applicants for vacant positions?
A) orientation
B) outsourcing
C) recruitment
D) selection
Q:
Planning for decruitment normally occurs when a company ________.
A) discontinues manufacturing or selling in a market
B) finds that current HR levels are lesser than anticipated needs
C) plans to establish multiple foreign subsidiaries
D) hires new executive leadership to implement a growth strategy
Q:
To insure against potential losses that result from adverse changes in exchange rates, Trader's Paradise should use currency ________.
A) swap
B) speculation
C) hedging
D) arbitrage
Q:
Which of the following phases of human resource planning involves decruitment?
A) developing a plan to recruit and select people to fill vacant and anticipated new positions
B) estimating the company's future human resource needs
C) taking an inventory of the company's current human resources
D) promoting employees to positions of greater responsibility
Q:
Which of the following is used by governments for the convertibility of currencies in their countries?A) multiple exchange ratesB) countertradeC) import deposit requirementsD) OTC market
Q:
Which of the following is the first phase of human resource planning?
A) developing a plan to recruit and select people to fill vacant and anticipated new positions
B) estimating the company's future human resource needs
C) taking an inventory of the company's current human resources
D) promoting employees to positions of greater responsibility
Q:
Governments impose currency restrictions in their countries to ________.
A) encourage future investment outflows
B) indirectly reduce imports and exports
C) protect currencies from speculators
D) exhaust their reserve of hard currencies
Q:
The process of forecasting both a company's human resource needs and its supply is called ________.
A) human resource planning
B) human resource accounting
C) recruitment
D) selection
Q:
________ is traded freely in the foreign exchange market, with its price determined by the forces of demand and supply.
A) Representative money
B) Private currency
C) Hard currency
D) Fiat money
Q:
The major disadvantage of a geocentric staffing policy is its potential for ________.
A) creating barriers for the host-country office
B) being costly due to high salaries and moving costs of managers
C) creating legal problems for the home-country office
D) losing control of host-country operations
Q:
________ is a decentralized exchange encompassing a global computer network of foreign exchange traders and other market participants.
A) Securities exchanges
B) Eurocurrency market
C) Interbank market
D) Over-the-counter market
Q:
A geocentric staffing policy is generally reserved for ________.
A) top-level managers
B) mid-level managers
C) nonmanagerial employees
D) lower-level staff
Q:
________ in the foreign exchange market specialize in currency futures and options transactions.
A) Securities exchanges
B) Eurocurrency markets
C) Interbank markets
D) Over-the-counter markets
Q:
Which of the following statements is true of geocentric staffing?
A) It reduces the high cost of relocating expatriate managers and their families.
B) It employs managers exclusively from the home country to look out for the company's interests.
C) It helps develop global managers who can adjust to any business environment.
D) It emphasizes on re-creating local operations in the image of home-country operations.
Q:
Explain the function of spot rates and the spot market.
Q:
A company that hires the best-qualified individuals, regardless of nationality, to manage foreign operations is utilizing a ________ approach.
A) horizontal integration
B) geocentric staffing
C) ethnocentric staffing
D) vertical integration
Q:
Explain the concept of cross rates. Include the description of a vehicle currency and the role it plays in the foreign exchange market.
Q:
The major drawback of polycentric staffing is the potential to ________.
A) lose control of host-country operations
B) experience a high incidence of expatriate failure
C) create barriers for the host-country office
D) create legal problems for the home-country office
Q:
Identify and explain the types of currency instruments used in the forward market.
Q:
An important advantage of polycentric staffing is that it ________.
A) re-creates local operations in the image of home-country operations
B) eliminates the high cost of relocating expatriate managers and their families
C) helps a company develop global managers who can adjust easily to any business environment
D) employs managers from home who will look out for the company's interests
Q:
The process of aggregating the currencies that one bank owes another and then carrying out the transaction is called clearing.
Q:
A(n)________ policy would give the foreign units of a company a degree of autonomy in decision-making.
A) centralized production
B) vertical integration
C) mass customization
D) polycentric staffing
Q:
Forward rates represent the expectations of currency traders and bankers regarding a currency's future spot rate.
Q:
In ________, operations outside the home country are managed by individuals from the host country.
A) vertical integration
B) horizontal integration
C) ethnocentric staffing
D) polycentric staffing
Q:
If an individual is traveling to another country and wants to exchange currencies at his bank before departing, he will be quoted the spot rate since he is exchanging on the spot.
Q:
Which of the following is a major drawback of ethnocentric staffing?
A) high costs of relocating managers
B) loss of control over host-country operations
C) loss of control over home-country operations
D) difficulty in the transfer of special know-how between branches
Q:
An exchange rate requiring delivery of the traded currency within two business days is called a cross rate.
Q:
Which of the following statements regarding ethnocentric staffing is true?
A) It can facilitate the transfer of special know-how.
B) It is a relatively inexpensive policy to implement.
C) It allows a company to "blend in" with the local market.
D) It is a poor choice for companies operating in highly nationalistic markets.
Q:
International transactions between two currencies other than the U.S. dollar often use the dollar as a vehicle currency.
Q:
A(n) ________ policy can be pursued to hire employees at all levels in an organization.
A) ethnocentric staffing
B) polycentric staffing
C) vertical integration
D) horizontal integration
Q:
Exchange rate risk is the risk of adverse changes in exchange rates.
Q:
Which of the following statements is true of ethnocentric staffing?
A) Ethnocentric staffing appeals to companies that maintain loose control over decision-making in branch offices abroad.
B) Companies that use ethnocentric staffing formulate policies designed to work in every country in which they operate.
C) Ethnocentric staffing is generally used to fill positions at all levels of an organization.
D) In ethnocentric staffing, individuals from the host country manage the operations abroad.
Q:
In any exchange rate, the quoted currency is always the numerator.