International Finance
Final Exam
Course Introduction
International Finance explores the financial dynamics that operate across national borders, focusing on the management of monetary flows, exchange rate systems, international financial markets, and global investment strategies. This course examines how multinational corporations navigate foreign exchange risk, international capital budgeting, and global financing options. Key topics include balance of payments, currency markets, international financial institutions, risk hedging instruments, and the economic impact of globalization. Students will develop analytical skills to assess international financial environments and make informed decisions in a rapidly evolving global marketplace.
Recommended Textbook
International Economics 15th Edition by Robert Carbaugh
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17 Chapters
1863 Verified Questions
1863 Flashcards
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Page 2
Chapter 1: The International Economy and Globalization
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48 Verified Questions
48 Flashcards
Source URL: https://quizplus.com/quiz/69522
Sample Questions
Q1) Does exposure to competition with the world leader in a particular industry improve a firm's productivity?
Answer: The McKinsey institute found that higher productivity rested on the ability of mangers to invent new and ever more efficient ways of making products and on the ability of engineers to design products that are easy to make.The institute researchers observed that in the auto industry in Japan or the food industry in the United States,managers and engineers do not achieve innovations because they are smarter work harder or are better educated than their peers.They do so because they are subjected to intense global competition,where improving labor productivity is the key to success.
Q2) International trade in goods and services is sometimes used as a substitute for all of the following except:
A) International movements of capital
B) International movements of labor
C) Domestic production of the same goods and services
D) Domestic production of different goods and services
Answer: D
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3
Chapter 2: Foundations of Modern Trade Theory: Comparative Advantage
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166 Verified Questions
166 Flashcards
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Sample Questions
Q1) Assume that the United States is more efficient than the United Kingdom in the production of all goods.Mutually beneficial trade is possible according to the principle of absolute advantage,but is impossible according to the principle of comparative advantage.
A)True
B)False
Answer: False
Q2) Unlike the mercantilists,Adam Smith maintained that:
A) Trade benefits one nation only at the expense of another nation
B) Government control of trade leads to maximum economic welfare
C) All nations can gain from free international trade
D) The world's output of goods must remain constant over time
Answer: C
Q3) Referring to Table 2.3,which countries' terms of trade worsened between 1990 and 2004?
A) Spain and Mexico
B) Mexico and France
C) France and Denmark
D) Denmark and Sweden
Answer: C
Page 4
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Chapter 3: Sources of Comparative Advantage
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) Generally speaking,transportation costs are more important than production costs as a source of comparative advantage.
A)True
B)False
Answer: False
Q2) Intra-industry trade can be explained by product differentiation,economies of scale,seasons of the year,and transportation costs.
A)True
B)False
Answer: True
Q3) Empirical studies conclude that U.S.environmental policies are a more important determinant of trade performance than capital,raw materials,labor skills,and wages.
A)True
B)False
Answer: False
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5
Chapter 4: Tariffs
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124 Verified Questions
124 Flashcards
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Sample Questions
Q1) Changes in a "large" country's economic conditions or trade policies can affect the terms at which it trades with other countries.
A)True
B)False
Q2) A tax of 20 cents per unit of imported cheese would be an example of:
A) Compound tariff
B) Effective tariff
C) Ad valorem tariff
D) Specific tariff
Q3) Consider Figure 4.1.With free trade,Mexico's producer surplus and consumer surplus respectively equal:
A) $5,$605
B) $25,$380
C) $45,$250
D) $85,$195
Q4) To protect domestic producers from foreign competition,the U.S.government levies both import tariffs and export tariffs.
A)True
B)False
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Chapter 5: Nontariff Trade Barriers
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134 Verified Questions
134 Flashcards
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Sample Questions
Q1) Consider Figure 5.6.In the global market for wine,the EU is willing to supply as much wine as the US demands at $8 per bottle.IF the US imposes a quota of 15 bottles of wine what will happen to consumer surplus?
A) decreases by $210
B) decreases by $245
C) stays the same
D) increases by $70
Q2) Consider Figure 5.5.With free trade,Mexicans produce 4 TVs,consume 24 TVs,and import 20 TVs.
A)True
B)False
Q3) In certain industries,Japanese employers do not lay off workers.Therefore,they sometimes have excess supplies of goods that they cannot sell on the home market without lowering prices.To hold down losses,they sell goods in overseas markets at prices well beneath those in Japan.This practice is best referred to as:
A) Orderly marketing
B) Trigger pricing
C) Domestic content pricing
D) Dumping
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Page 7
Chapter 6: Trade Regulations and Industrial Policies
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) Under the normal-trade-relations (most-favored-nation)principle,two nations agree to apply tariffs to each other at rates as low as those applied to any other nation.
A)True
B)False
Q2) Consider Figure 6.3.In response to Iraq's armed invasion of neighboring countries,suppose the United States imposes a partial embargo that limits exports to Iraq to 10 computers.The export quota leads to an increase/decrease in the price of computers equal to $____,and an increase/decrease in consumer surplus equal to $____.
A) Increase,$2000,decrease,$40,000
B) Increase,$4000,decrease,$60,000
C) Decrease,$2000,increase,$40,000
D) Decrease,$4000,increase,$60,000
Q3) For the United States,which organization makes loans to foreign buyers of U.S.manufactured goods?
A) Export-Import Bank
B) Domestic International Sales Corporation
C) Organization for Economic Cooperation and Development
D) Commodity Credit Corporation
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Page 8
Chapter 7: Trade Policies for the Developing Nations
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) Export-led growth industrialization suffers a major problem: it depends on the willingness and ability of foreign nations to absorb the goods exported by the country pursuing such a policy.
A)True
B)False
Q2) Concerning the price elasticities of supply and demand for commodities,empirical estimates suggest that most commodities have:
A) Inelastic supply schedules and inelastic demand schedules
B) Inelastic supply schedules and elastic demand schedules
C) Elastic supply schedules and inelastic demand schedules
D) Elastic supply schedules and elastic demand schedules
Q3) To be considered a good candidate for an export cartel,a commodity should:
A) Be a manufactured good
B) Be a primary product
C) Have a low price elasticity of supply
D) Have a high price elasticity of demand
Q4) What are some of the growth strategies that have been employed by the developing nations? How successful are these strategies?
Q5) What are some major trade problems faced by developing nations?
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Chapter 8: Regional Trading Arrangements
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) Under the variable levy system of the European Union,EU farmers are protected against import competition by tariffs that vary inversely with the world price.
A)True
B)False
Q2) During the 1980s and 1990s,the United States negotiated free-trade agreements with Israel,Mexico,and Canada.
A)True
B)False
Q3) Trade creation tends to more than offset trade diversion for a home country forming a customs union with partner countries when: (1)the tariff rate in the home country is high prior to the formation of the customs union; (2)there are a large number of countries forming the customs union.
A)True
B)False
Q4) When a group of countries establish a free-trade area,they achieve the highest stage of economic integration.
A)True
B)False
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Chapter 9: International Factor Movements and Multinational Enterprises
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) Multinational enterprises:
A) Increase the transfer of technology between nations
B) Make it harder for nations to foster activities of comparative advantage
C) Always enjoy political harmony in nations where their subsidiaries operate
D) Require governmental subsidies in order to conduct worldwide operations
Q2) Suppose that a steel manufacturer headquartered in Japan sets up a subsidiary in Canada to produce steel.This practice is referred to as:
A) Conglomerate integration
B) Forward vertical integration
C) Backward vertical integration
D) Horizontal integration
Q3) What are the typical ways in which multinational enterprises have diversified their operations?
Q4) Joint ventures lead to national welfare gains if the newly established business yields productivity increases that would have been unavailable if each parent performed the same function separately.
A)True
B)False
Q5) What are guest workers?
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Chapter 10: The Balance of Payments
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92 Verified Questions
92 Flashcards
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Sample Questions
Q1) An increase in import restrictions by the U.S.government tends to promote a merchandise-trade surplus.
A)True
B)False
Q2) On the U.S.balance-of-payments statement,the following transactions are credits,leading to the receipt of dollars from foreigners: merchandise exports,transportation receipts,income received from investments abroad,and investments in the United States by foreign residents.
A)True
B)False
Q3) Reducing a current account deficit requires a country to:
A) Increase the government's deficit and increase private investment relative to saving
B) Increase the government's deficit and decrease private investment relative to saving
C) Decrease the government's deficit increase private investment relative to saving
D) Decrease the government's deficit and decrease private investment relative to saving
Q4) What does a current account deficit mean?
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Chapter 11: Foreign Exchange
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) A U.S.export company scheduled to receive 1 million pounds six months from today can hedge its foreign exchange risk by:
A) Buying today 1 million pounds in the forward market for delivery in six months
B) Buying 1 million pounds in the spot market for delivery in six months
C) Selling 1 million pounds in the spot market for delivery in six months
D) Selling today 1 million pounds in the forward market for delivery in six months
Q2) Which of the following would not induce the U.S.demand curve for foreign exchange to shift backward to the left?
A) Worsening American tastes for goods produced overseas
B) Decreasing interest rates in the U.S.compared to those overseas
C) A fall in the level of U.S.income
D) A depreciation in the U.S.dollar against foreign currencies
Q3) Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds,a decrease in the demand schedule causes an appreciation of the dollar against the pound.
A)True
B)False
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Page 13
Chapter 12: Exchange-Rate Determination
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) Refer to Figure 12.2.If Swiss manufacturing costs increase relative to those of the United States,there would occur an increase in the supply of francs and an appreciation in the dollar's exchange value.
A)True
B)False
Q2) Under floating exchange rates,relatively low domestic interest rates tend to promote depreciation of a currency's exchange value while relatively high domestic interest rates lead to currency appreciation.
A)True
B)False
Q3) An exchange rate is said to ____ when its short-run response to a change in market fundamentals is greater than its long-run response.
A) Overshoot
B) Undershoot
C) Depreciate
D) Appreciate
Q4) What is the purchasing power parity approach to exchange rate determination?
Q5) In a free market,what determines exchange rates in the long run and the short run?
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Page 14
Chapter 13: Mechanisms of International Adjustment
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107 Verified Questions
107 Flashcards
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Sample Questions
Q1) Refer to Figure 13.2.Starting at equilibrium income $50 billion,where (S-I)<sub>0</sub> intersects (X-M)<sub>0</sub>,suppose that increased thriftiness leads to an autonomous increase in Australian saving of $5 billion.Australian income thus ____ which leads to Australia's trade account moving to a ____.
A) Rises to $60 billion,deficit of $2.5 billion
B) Rises to $60 billion,deficit of $5 billion
C) Falls to $40 billion,surplus of $2.5 billion
D) Falls to $40 billion,surplus of $5 billion
Q2) Assume that Canada initially faces payments equilibrium in its merchandise trade account as well as in its capital and financial account.Now suppose that Canadian interest rates increase to levels higher than those abroad.For Canada,this tends to promote:
A) Net financial inflows
B) Net financial outflows
C) Net merchandise exports
D) Net merchandise imports
Q3) Explain David Hume's theory of automatic adjustment for balance of payments disequilibria.
Q4) What is the foreign repercussion effect?
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Chapter 14: Exchange-Rate Adjustments and the Balance of Payments
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) The J-curve effect implies that the price elasticity of demand for imports and exports is more elastic in the short run than in the long run.
A)True
B)False
Q2) When manufacturing computer software,suppose that Microsoft Inc.uses labor and materials whose costs are denominated in dollars and francs respectively.If the dollar's exchange value depreciates 10 percent against the franc,the franc-denominated cost of the firm's software falls by 10 percent.
A)True
B)False
Q3) From 1985 to 1988 the U.S.dollar depreciated over 50 percent against the yen,yet Japanese export prices to Americans did not come down the full extent of the dollar depreciation.This is best explained by:
A) Partial currency pass-through
B) Complete currency pass-through
C) Partial J-curve effect
D) Complete J-curve effect
Q4) What is a pass-through relationship?
Page 16
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Chapter 15: Exchange-Rate Systems and Currency Crises
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107 Verified Questions
107 Flashcards
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Sample Questions
Q1) If Uganda revalues its shilling by 20 percent and Burundi devalues its franc by 5 percent,the shillings exchange value will appreciate by 25 percent against the franc.
A)True
B)False
Q2) Today,fixed exchange rates are used primarily by small,developing countries that tie their currencies to a key currency such as the U.S.dollar.
A)True
B)False
Q3) To offset an appreciation in the dollar's exchange value,the Federal Reserve can nudge interest rates down in the United States which results in net investment outflows.
A)True
B)False
Q4) Large industrial nations with diversified economies and small trade sectors have generally pegged their currencies to one of the world's key currencies.
A)True
B)False
Q5) What is an SDR?
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Chapter 16: Macroeconomic Policy in an Open Economy
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72 Verified Questions
72 Flashcards
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Sample Questions
Q1) Suppose a central bank prevents a depreciation of its currency by intervening in the foreign exchange market and buying its currency with foreign currency.This causes the
A) domestic money supply to decrease and a decline in aggregate demand
B) domestic money supply to increase and a decline in aggregate demand
C) domestic money supply to decrease and a rise in aggregate demand
D) domestic money supply to increase and a rise in aggregate demand
Q2) Economic policymakers have typically adopted expenditure-increasing policies to combat inflation and expenditure-reducing policies to combat recession.
A)True
B)False
Q3) Expenditure-switching policies alter the level of total spending (aggregate demand)for goods and services produced domestically and those imported.
A)True
B)False
Q4) The Group of five (G-5)nations include Japan,Germany,China,and Australia.
A)True
B)False
Q5) What is international economic policy coordination?
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Chapter 17: International Banking: Reserves, Debt, and Risk
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Sample Questions
Q1) International reserves allow a country to finance disequilibria in its balance-of-payments position.
A)True
B)False
Q2) Because the value of the SDR is tied directly to the value of the U.S.dollar,a 10 percent dollar depreciation would result in a 10 percent decrease in the SDR's value.
A)True
B)False
Q3) Swap arrangements
A) Are agreements between governments
B) Require repayment within a stipulated period
C) Are usually multilateral agreements
D) Are never initiated by telephone
Q4) Swap agreements are generally conducted by the:
A) Federal Reserve with foreign central banks
B) Federal Reserve with foreign commercial banks
C) U.S.Treasury with foreign central banks
D) U.S.Treasury with foreign commercial banks
Q5) Describe the eurocurrency market.
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