International Business Test Questions
Course Introduction
International Business explores the complexities of conducting commercial activities across national borders, focusing on the strategies, structures, and operations of multinational enterprises. The course delves into the dynamic global economic environment, including cultural, political, legal, and economic differences that impact international trade and investment. Students will examine topics such as market entry strategies, global supply chain management, foreign exchange markets, and regulatory frameworks. Emphasis is placed on understanding the challenges and opportunities faced by organizations operating internationally, preparing students to effectively navigate and succeed in the global business landscape.
Recommended Textbook
International Money and Finance 8th Edition by Michael Melvin
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13 Chapters
694 Verified Questions
694 Flashcards
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Page 2
Chapter 1: The Foreign Exchange Market
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71 Verified Questions
71 Flashcards
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Sample Questions
Q1) When the exchange rate changes from 0.9 euros per dollar to 1.0 euros per dollar,then
A) the euro has appreciated and the dollar has appreciated.
B) the euro has depreciated and the dollar has appreciated.
C) the euro has appreciated and the dollar has depreciated.
D) the euro has depreciated and the dollar has depreciated.
Answer: B
Q2) If you are an arbitrageur that starts with $1,000 in New York,
A) You will buy pound in New York, because pound is cheaper in New York.
B) You will buy yen in New York, because pound is more expensive in New York.
C) You will buy both pound and yen in New York to spread the risk.
D) There is no arbitrage opportunity in this case.
Answer: B
Q3) If the Japanese yen was worth $.005 six months ago and is now worth $.007 today,the yen has appreciated by 40%.
A)True
B)False
Answer: True
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Chapter 2: International Monetary Arrangements
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52 Flashcards
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Sample Questions
Q1) Countries with floating exchange rates tend to have large,closed economies and trade largely with a single foreign country.
A)True
B)False
Answer: False
Q2) When the United States suspended the convertibility of dollars into gold in 1971,this lead to:
A) The collapse of the Bretton Woods system
B) Creation of the regional currency boards
C) Creation of the International Monetary Fund
D) All of the above
Answer: A
Q3) A managed floating exchange rate is a market determined exchange system as long as rates stay between target zones as mandated by legislative commitments.
A)True
B)False
Answer: False
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Chapter 3: The Balance of Payments
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51 Verified Questions
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Sample Questions
Q1) A U.S.gift of wheat to a Nicaragua causes a:
A) Debit in the U.S. merchandise account
B) Debit in the U.S. unilateral transfers
C) Debit in the U.S. private capital account
D) Credit in the U.S. private capital account
Q2) A U.S.citizen takes a cruise on a Norwegian cruise line to Canada causes a:
A) Credit in U.S. services
B) Credit to the U.S. unilateral transfers
C) Credit in the U.S. private capital account
D) Debit in the U.S. private capital account
Q3) The German government donates $100,000 worth of vaccine to Tanzania.This action is recorded as a $100,000 debit to the German unilateral transfers.
A)True
B)False
Q4) A U.S.car company builds a factory in Mexico causes a:
A) Debit in U.S. services
B) Debit in the U.S. unilateral transfers
C) Debit in the U.S. private capital account
D) Credit in U.S. private capital account
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Chapter 4: Forward-Looking Market Instruments
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44 Flashcards
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Sample Questions
Q1) The forward exchange swap is a process involving the same amount of three currencies.
A)True
B)False
Q2) The exchange market has seen the rise of new contracts combines features of forward contracts and option contracts.
A)True
B)False
Q3) If the owner of the option exercises the right to buy or sell,the seller of the option must ________.
A) Find a broker for the buyer.
B) Set the strike price and find a new buyer.
C) Calculate the new strike price based upon the days left on the contract.
D) Buy or sell the financial instrument to the buyer.
Q4) A strike price is the price where:
A) A futures contract reaches maturity.
B) The owner of an options contract can transact.
C) The bank sets as an out-of-bounds in contract negotiations.
D) All currencies are brought to a standardized price.
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Chapter 6: Exchange Rates, interest Rates, and Interest
Parity
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64 Verified Questions
64 Flashcards
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Sample Questions
Q1) The structure of interest rates existing on investment opportunities over time is known as the flat structure of interest rates.
A)True
B)False
Q2) Suppose interest parity holds.There is a change in U.S.policy that leads to expectations of a lower U.S.inflation rate.The decrease in expected inflation will cause dollar interest rates to _______.
A) Stay the same.
B) Fall.
C) Rise.
D) None of the above.
Q3) The exact and approximate CIRP are close in value when
A) Interest rates are larger
B) Interest rates are smaller
C) Spot rates are larger
D) Spot rates are smaller
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Chapter 7: Prices and Exchange Rates: Purchasing Power
Parity
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Sample Questions
Q1) If the absolute PPP suggest that the dollar to pound should be 1.88 and the actual exchange rate in London is 2.50 $/pound,then:
A) The British pound is overvalued.
B) The U.S. dollar is overvalued
C) The British pound is undervalued
D) Exchange rates and absolute PPP are unrelated.
Q2) Purchasing power parity PPP explains the relationship between interest rates and product price changes.
A)True
B)False
Q3) In the presence of purchasing-power parity,if one dollar exchanges for one Euro and a new laptop sells for $750 in New York,then the identical laptop in Paris should cost:
A) 400 Euros
B) 600 Euros
C) 750 Euros
D) 1000 Euros
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8
Chapter 8: Foreign Exchange Risk and Forecasting
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Sample Questions
Q1) The ________ in the forward exchange market is equal to the effective return differential.
A) Strike price
B) Exposure risk
C) Future spot exchange rate
D) Risk premium
Q2) Suppose that the 1-year forward rate of dollar per Swiss franc is $0.42,the current spot rate $/SFr is $0.40,and the expected future spot rate $/SFr is $0.45.The risk premium equals to:
A) - 7.5%
B) 5%
C) 6.67%
D) 12.5%
Q3) In the "uncovered interest rate parity," the forward rate is assumed to include a ________.
A) Return differential
B) Exposure risk
C) Risk premium
D) Future spot exchange rate
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Page 9
Chapter 9: Financial Management of the Multinational Firm
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50 Flashcards
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Sample Questions
Q1) Which of the following is probably NOT an example of the use of forward contracts by a multinational corporation MNC?
A) Hedging pound payables by selling pounds forward
B) Hedging peso receivables by selling pesos forward
C) Hedging yen payables by purchasing yen forward
D) All of the above are examples of using forward contracts
Q2) When a multinational firm calculates a project for a foreign subsidiary with ________ net value,then the project should probably be ________.
A) Zero, delayed
B) Positive, sold
C) Negative, accepted
D) Positive, accepted
Q3) Suppose Banana Computers has a foreign subsidiary with a 3 million pound payable due on October 1,as well as 2 million pound receivable due on September 1.One way the firm could avoid transaction costs is:
A) Lagging currency flows
B) Capital budgeting
C) Risk analysis
D) Transfer pricing
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Chapter 10: International Portfolio Investment
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Sample Questions
Q1) Company specific risk is also known as:
A) market risk.
B) systematic risk.
C) non-diversifiable risk.
D) nonsystematic risk.
Q2) Consider the following variances of different stocks all with the same expected returns.Which stock represents the best choice for a risk averse investor?
A) Stock A: 0.03
B) Stock B: 0.25
C) Stock C: 0.005
D) Stock D: 0.22
Q3) A GDR is similar to the ADR except that it is:
A) Sold only to preferred investors
B) Available in more than one market
C) A high variance investment
D) A low variance investment
Q4) Portfolio diversification explains the two-way flow of capital between countries.
A)True
B)False
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Chapter 12: Determinants of the Balance of Trade
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Sample Questions
Q1) The Marshall-Lerner condition indicates that if the sum of absolute values of the elasticities of demand for imports and demand for exports is greater than one,a currency devaluation will fail to improve the balance of trade.
A)True
B)False
Q2) Assume that a country is at full employment and wants to improve its trade deficit by
Devaluing its currency.Using the absorption approach which of the following methods will improve the trade deficit?
I.Decrease government spending
II.Decrease consumption taxes
III.Decrease income taxes
A) I only
B) II only
C) II and III
D) I, II, and III
Q3) The responsiveness of quantity to changes in price refers to elasticity.
A)True
B)False
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Page 12
Chapter 13: The Is-Lm-Bp Approach
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Sample Questions
Q1) When the leakages are ________ the injections,then the value of income received from producing goods and services will equal to total spending.
A) Greater than
B) Less than
C) Equal to
D) The sum of
Q2) Due to the potential for dueling fiscal policies and sharp movements in exchange rates,some countries have pursued:
A) International policy coordination.
B) Protectionist tariffs
C) Isolationism policies
D) World bank trade agreements
Q3) The internal and external equilibrium occurs when the IS curve crosses the LM curve above the BP curve.
A)True
B)False
Q4) "The BP curve could be vertical,if capital is perfectly mobile."
A)True
B)False
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Chapter 14: The Monetary Approach
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Sample Questions
Q1) The basic premise of the monetary approach is that:
A) Exchange rate movements change according to uncontrolled shocks.
B) Holdings of international reserves should be minimized.
C) Any balance of payments disequilibrium is based on a monetary disequilibrium.
D) People's willingness to hold money can alter exchange rates but not the balance of payments.
Q2) Starting from a position where a country's money demand equals the money supply and its balance of payments is in equilibrium.According to the monetary approach,an expansionary monetary policy will lead to an ______ of the home currency under flexible exchange rate regime; whereas it will cause trade _______ under fixed exchange rate.
A) depreciation; deficit
B) depreciation; surplus
C) appreciation; deficit
D) appreciation; surplus
Q3) "Under the monetary approach to exchange rate,a rise in domestic income will cause a depreciation of domestic currency."
A)True
B)False
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Chapter 15: Extensions to the Monetary Approach of Exchange Rate Determination
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Sample Questions
Q1) Use the Portfolio-Balance Approach to answer this question.Other things remaining constant,if the supply of domestic bonds increases,what would happen to the domestic currency?
A) The domestic currency would appreciate.
B) The domestic currency would depreciate.
C) The domestic currency would not change.
D) The domestic currency would sharply depreciate and then appreciate later.
Q2) ___________ assumes that domestic and foreign bonds are imperfect substitutes.
A) The monetary approach to exchange rate
B) The portfolio-balance approach
C) The currency substitution approach
D) The overshooting theory
Q3) According to the ________,if the cost of holding one currency rises relative to the cost of holding another,then demand will shift to the lower relative cost currency.
A) Overshooting approach
B) Currency substitution approach
C) Portfolio-balance approach
D) Trade balance approach
15
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