Global Finance
Final Test Solutions
Course Introduction
Global Finance explores the international financial environment, focusing on how economic factors, government policies, exchange rates, and global markets influence organizations and investment decisions around the world. Students will examine the structure and function of international financial institutions, understand financial instruments and markets, assess risk in cross-border investments, and analyze the impact of global events on financial flows. The course equips learners with tools to navigate foreign exchange markets, manage international financial risks, and evaluate strategies for multinational corporations.
Recommended Textbook
International Finance Theory and Policy 10th Edition by Paul R. Krugman
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12 Chapters
706 Verified Questions
706 Flashcards
Source URL: https://quizplus.com/study-set/1029
Page 2
Chapter 1: Introduction
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40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/20417
Sample Questions
Q1) International capital markets experience a kind of risk not faced in domestic capital markets,namely
A) "economic meltdown" risk.
B) Flood and hurricane crisis risk.
C) the risk of unexpected downgrading of assets by Standard and Poor.
D) the risk of exchange rate fluctuations.
E) the risk of political upheaval.
Answer: D
Q2) Cost-benefit analysis of international trade
A) is basically useless.
B) is empirically intractable.
C) focuses attention primarily on conflicts of interest within countries.
D) focuses attention on conflicts of interest between countries.
E) never leads to government intervention in international trade.
Answer: C
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Chapter 2: National Income Accounting and the Balance of Payments
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79 Verified Questions
79 Flashcards
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Sample Questions
Q1) Government transfer payments like social security and unemployment benefits are
A) included in government purchases.
B) not included in government purchases.
C) not included in government purchases, but they are included in the consumption component of GNP.
D) not included in government purchases, but they are part of the investment component of GNP.
E) included in government purchases but not in the GNP.
Answer: B
Q2) Consider how the United States balance of payments accounts are affected when U.S.banks forgive two billion in debt owed to them by the government of Argentina. Answer: In this case,the United States makes a two billion dollars capital transfer to Argentina,which should appear as a negative two billions entry in the capital account.The associated credit is in the financial account,in the form of a two billion dollars reduction in U.S.assets held abroad,i.e.,a net asset "export," and therefore a positive balance of payments entry.
Q3) What is the national income identity for an open economy?
Answer: Y = C + I + G + EX - IM
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Chapter 3: Labor Productivity and Comparative Advantage:
The Ricardian Model
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70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/20418
Sample Questions
Q1) A nation engaging in trade according to the Ricardian model will find its consumption bundle
A) inside its production possibilities frontier.
B) on its production possibilities frontier.
C) outside its production possibilities frontier.
D) inside its trade-partner's production possibilities frontier.
E) on its trade-partner's production possibilities frontier.
Answer: C
Q2) Given the information in the table above.What is the opportunity cost of Cloth in terms of Widgets in Foreign?
Answer: One half a widget.
Q3) Given the information in the table above.If these two countries trade these two goods with each other in context of the Ricardian model of comparative advantage,what is the lower limit for the price of cloth?
Answer: One half a widget.
Q4) Given the information in the table above.What is the opportunity cost of cloth in terms of Widgets in Foreign?
Answer: 2 widgets.
Page 5
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Chapter 4: Specific Factors and Income Distribution
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70 Verified Questions
70 Flashcards
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Sample Questions
Q1) U)S.imports of sugar are limited by an import quota that,according to a study updated in 2013,imposed a total cost on American consumers close to $________,or an average cost of ________ per year for every man,woman,and child in the country.
A) $3 billion; $10
B) $105 million; $3
C) $2 billion; $110
D) $3 billion; $2,000
E) $370 million; $2,000
Q2) A country will realize no gains from trade if
A) pre-trade and free-trade relative prices are identical.
B) all countries employ the same technology.
C) it does not have an absolute advantage in at least one good.
D) its wage exceeds the world average.
E) pre-trade and free-trade relative prices are not identical.
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Chapter 5: Resources and Trade: The Heckscher-Ohlin Model
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66 Verified Questions
66 Flashcards
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Sample Questions
Q1) Why do we observe the Leontief paradox?
Q2) In the 2-factor,2 good Heckscher-Ohlin model,trade will ________ the owners of a country's ________ factor and will ________ the good that uses that factor intensively.
A) benefit; abundant; export
B) harm; abundant; import
C) benefit; scarce; export
D) benefit; scarce; import
E) harm; scarce; export
Q3) If a country produces good Y (measured on the vertical axis)and good X (measured on the horizontal axis),then the absolute value of the slope of its production possibility frontier is equal to
A) the opportunity cost of good X.
B) the price of good X divided by the price of good Y.
C) the price of good Y divided by the price of good X.
D) the opportunity cost of good Y.
E) the cost of capital (assuming that good Y is capital intensive) divided by the cost of labor.
Q4) International trade leads to complete equalization of factor prices.Discuss.
Q5) Why is the H.O.model called the factor-proportions theory?
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Chapter 6: The Standard Trade Model
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48 Verified Questions
48 Flashcards
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Sample Questions
Q1) Rapidly growing developing countries tend to be borrowers on the international capital markets.From this information we may surmise that they have a comparative advantage in
A) future income.
B) capital goods.
C) disposable income.
D) consumer goods.
E) present income.
Q2) Describe the nature of trade between two countries based on intertemporal comparative advantage.
Q3) A fall in the real interest rate,all other things held constant,will cause a country's ________ to ________.
A) current consumption: increase
B) current consumption: decrease
C) terms of trade; improve
D) terms of trade; worsen
E) welfare level; improve
Q4) What is intertemporal comparative advantage?
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Chapter 7: External Economies of Scale and the
International Location of Production
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37 Verified Questions
37 Flashcards
Source URL: https://quizplus.com/quiz/20422
Sample Questions
Q1) The primary determinant of patterns of interregional trade is
A) accidents of history.
B) resource allocations.
C) factor abundance.
D) weather.
E) centralized optimization.
Q2) If output is increased in the long-run,then in the presence of internal economies of scale the number of firms will ________,and in the presence of constant external returns to scale the number of firms will ________.
A) decrease; decrease
B) increase; remain constant
C) remain constant; increase
D) decrease; remain constant
E) increase; decrease
Q3) Is it possible for an equilibrium that is consistent with purely competitive conditions to arise in an industry with positive scale economies? If so,explain how this could happen.If not,why not?
Q4) What is meant by an "industrial district" and what are the three main sources of the economic advantages derived from locating in such a district?
Page 9
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Chapter 8: Firms in the Global Economy: Export
Decisions,Outsourcing,and Multinational Enterprises
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69 Verified Questions
69 Flashcards
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Sample Questions
Q1) The figure above represents the demand and cost functions facing a Brazilian Steel producing monopolist.If it were unable to export,and was constrained by its domestic market,what quantity would it sell at what price?
Q2) Under the model of monopolistic competition,a(an)________ in the number of firms in the industry will cause ________ to ________. A) increase; markup; decrease B) increase; average price; increase C) increase; average cost; decrease D) decrease; markup; decrease E) increase; marginal cost; decrease
Q3) In the model of monopolistic competition,if firms have ________ average cost curves,then opening trade will cause ________ firms to ________ the industry. A) different; less efficient; exit B) different; more efficient; enter C) symmetric; less efficient; exit D) symmetric; more efficient; enter E) symmetric; less efficient; enter
Q4) What are the consequences of outsourcing production on the welfare of countries?
Page 10
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Chapter 9: The Instruments of Trade Policy
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74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/20424
Sample Questions
Q1) What is a TRUE statement concerning the imposition in the U.S.of a tariff on cheese?
A) It lowers the price of cheese domestically.
B) It raises the price of cheese internationally.
C) It raises revenue for the government.
D) It will always result in retaliation from abroad.
E) it leads to higher domestic demand for cheese.
Q2) Refer to above figure.With a specific tariff of $3 per unit,what is the quantity of Widgets produced domestically?
Q3) If a good is imported into (large)country H from country F,then the imposition of a tariff in country H
A) raises the price of the good in both countries (the "Law of One Price").
B) raises the price in country H and cannot affect its price in country F.
C) lowers the price of the good in both countries.
D) lowers the price of the good in H and could raise it in F.
E) raises the price of the good in H and lowers it in F.
Q4) Refer to above figure.In the absence of trade,what is the country's consumer surplus?
Q5) Refer to above figure.In the absence of trade,how many Widgets does this country produce?
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Chapter 10: The Political Economy of Trade Policy
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63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/20425
Sample Questions
Q1) The optimum tariff is most likely to apply to
A) a small tariff imposed by a small country.
B) a small tariff imposed by a large country.
C) a large tariff imposed by a small country.
D) a large tariff imposed by a large country.
E) an ad valorem tariff on a small country.
Q2) The fact that trade policy often imposes harm on large numbers of people,and benefits only a few may be explained by
A) the lack of political involvement of the public.
B) the power of advertisement.
C) the problem of collective action.
D) the basic impossibility of the democratic system to reach a fair solution.
E) a cycle of political corruption.
Q3) The median voter model
A) works well in the area of trade policy.
B) is not intuitively reasonable.
C) tends to result in biased tariff rates.
D) does not work well in the area of trade policy.
E) is not widely practiced in the United States.
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Page 12
Chapter 11: Trade Policy in Developing Countries
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43 Verified Questions
43 Flashcards
Source URL: https://quizplus.com/quiz/20426
Sample Questions
Q1) The United States,as it began its long and successful growth in the early 19th century,consciously promoted domestic production through such activities as tariffs,Clay's American System,and many direct subsidies to railroads,canal companies,farmers (free land)etc.Today we view this blatant example of large scale and extensive import-substitution industrialization as having been very successful.Comment on this.
Q2) The consensus today is that import-substitution protectionist industrial policy has not served the developing countries' growth ambitions well.This fact proves that policies relying on export-driven growth are the "winning ticket" for these countries.
Q3) Sophisticated theoretical arguments supporting import-substitution policies include
A) terms of trade effects.
B) scale economy arguments.
C) learning curve considerations.
D) the problem of appropriability.
E) domestic market failure arguments.
Q4) Refer to above figure.If the economy were in the initial position (where OmL1 workers were in manufacturing,what trade policy might gain ABC of economic welfare?
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Page 13
Chapter 12: Controversies in Trade Policy
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47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/20427
Sample Questions
Q1) Working conditions for clothing workers in Bangladesh are very poor.If countries refuse to buy clothing from Bangladesh in order to encourage change,the effect is likely to be that
A) firms will be forced to comply and workers will be better off.
B) firms will refuse to comply, but workers will be better off.
C) firms will try to comply and workers will be worse off.
D) firms will try to comply and workers will be better off.
E) regardless of how firms respond, workers will be better off.
Q2) The reason Airbus succeeded in the Brander Spencer example is that
A) the European government made an explicit subsidy offer, but the U.S. government did not.
B) Airbus' prices were better when adjusted for quality and warranty services.
C) Boeing traditionally refused to undertake any exchange rate risk in its transactions.
D) the U.S. acted in accordance with its ideological reliance on market solutions, whereas the Europeans ignored market and technological factors.
E) the Airbus plane benefited from more advanced technology.
Q3) Refer to the above table.Suppose both governments offer their respective company a subsidy of $4(million).
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