International Finance Test
Bank
Course Introduction
International Finance explores the financial management and operations of multinational firms within the global marketplace. The course covers topics such as foreign exchange markets, international monetary systems, exchange rate determination, risk exposure and management, global capital budgeting, international financial instruments, and cross-border investment strategies. Students will analyze how international financial environments influence corporate decision-making, assess the risks and opportunities of foreign operations, and examine the impact of international regulations and monetary policies on businesses. This course prepares students to navigate the complexities of global finance and develop effective strategies for managing international financial challenges.
Recommended Textbook
International Economics 14th Edition by Robert Carbaugh
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17 Chapters
1874 Verified Questions
1874 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/21353
Sample Questions
Q1) Arguments for free trade are sometimes disregarded by politicians because:
A) Maximizing domestic efficiency is not considered important
B) Maximizing consumer welfare may not be a chief priority
C) There exist sound economic reasons for keeping one's economy isolated from other economies
D) Economists tend to favor highly protected domestic markets
Answer: B
Q2) The benefits of international trade accrue in the forms of lower domestic prices, development of more efficient methods and new products, and a greater range of consumption choices.
A)True
B)False
Answer: True
Q3) Opening the economy to international trade tends to lessen inflationary pressures at home.
A)True
B)False
Answer: True
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3
Chapter 2: Foundations of Modern Trade Theory: Comparative Advantage
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) By reducing the overall volume of trade, import restrictions tend to reduce a nation's gains from trade.
A)True
B)False
Answer: True
Q2) If Japan loses competitiveness in computers, Japanese computer workers lose jobs to foreign computer workers and the wages of Japanese computer workers tend to fall relative to the wages of foreign computer workers.
A)True
B)False
Answer: True
Q3) In a two-country, two-product world, the statement "Japan enjoys a comparative advantage over France in steel relative to bicycles" is equivalent to:
A) France having a comparative advantage over Japan in bicycles relative to steel
B) France having a comparative disadvantage against Japan in bicycles and steel
C) Japan having a comparative advantage over France in steel and bicycles
D) Japan having a comparative disadvantage against Japan in bicycles and steel
Answer: A
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Chapter 3: Sources of Comparative Advantage
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) According to the product-life-cycle theory, the first stage of a product's trade cycle is when it is introduced to the home market.
A)True
B)False
Answer: True
Q2) Which of the following suggests that a nation will export the commodity in the production of which a great deal of its relatively abundant and cheap factor is used?
A) The Linder theory
B) The product life cycle theory
C) The MacDougall theory
D) The Heckscher-Ohlin theory
Answer: D
Q3) The product-life-cycle model contends that when a new product is introduced to the home market, it generally requires low-skilled labor to produce it.
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) Refer to Exhibit 4.2. The tariff's redistribution effect equals $7,000.
A)True
B)False
Q2) The offshore assembly provision in the U.S.
A) Provides favorable treatment to U.S. trading partners
B) Discriminates against primary product importers
C) Provides favorable treatment to products assembled abroad from U.S. manufactured components
D) Hurts the U.S. consumer
Q3) Consider Table 4.1. The effective tariff rate equals:
A) 11.1 percent
B) 16.7 percent
C) 50.0 percent
D) 100.0 percent
Q4) According to Figure 4.2, the tariff's terms-of-trade effect equals:
A) $300
B) $400
C) $500
D) $600
Q5) Can import duties have unintended side effects?
Page 6
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Chapter 5: Nontariff Trade Barriers
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) Consider Figure 5.3. After the quota is levied, the price of apples in Sweden will equal:
A) $0.60 per pound
B) $1.00 per pound
C) $1.40 per pound
D) $1.80 per pound
Q2) Import tariffs and import quotas yield identical protection effects, consumption effects, redistribution effects, and revenue effects.
A)True
B)False
Q3) A firm that faces problems of falling sales and excess productive capacity might resort to international dumping if it:
A) Can charge higher prices in markets that are elastic to price changes
B) Earns revenues on foreign sales that at least cover variable costs
C) Can sell at that price where domestic and foreign demand elasticities equate
D) Is able to force foreign prices below marginal production costs
Q4) What is an OMA?
Q5) Is a tariff-rate quota a two-tier tariff? Why?
Q6) Describe some of the differences between tariffs and quotas?
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Chapter 6: Trade Regulations and Industrial Policies
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129 Verified Questions
129 Flashcards
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Sample Questions
Q1) It is widely recognized that the economic sanctions levied against Iraq in 1990 were a major factor causing Iraq to withdraw its military forces from Kuwait.
A)True
B)False
Q2) Consider Figure 6.3. With free trade, Iraq purchases ____ computers at a price of $____, and realizes $____ of consumer surplus from the availability of computers.
A) 30, $3,000, $25,000
B) 30, $3,000, $35,000
C) 30, $3,000, $45,000
D) 30, $3,000, $55,000
Q3) Explain how advocates of strategic trade policy differ from the classical free traders in their treatment of externalities?
Q4) Assume that Russia has a comparative advantage in vodka. If the United States extends Russia the benefits of the normal-trade-relations (most favored nation)principle, U.S. consumer surplus decreases in the vodka market.
A)True
B)False
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Chapter 7: Trade Policies for the Developing Nations
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100 Verified Questions
100 Flashcards
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Sample Questions
Q1) 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
Q2) It is widely agreed that import-substitution policies have been a main contributor to above-average growth rates in developing countries.
A)True
B)False
Q3) Consider Figure 7.2. Assume there exists a cartel of several producers that is maximizing total profit. If one producer cheats on the cartel agreement by decreasing its price and increasing its output, rational action of the other producers is to:
A) Increase their price in order to regain sacrificed profits
B) Decrease their price as well
C) Keep on selling at the agreed-upon price
D) Give the product away for free
Q4) Are economic downturns helpful to cartels?
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Page 9
Chapter 8: Regional Trading Arrangements
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130 Verified Questions
130 Flashcards
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Sample Questions
Q1) Which organization of nations permits free trade among its members in industrial goods, while each member maintains freedom in its trade policies toward non-member countries?
A) European Union
B) Benelux
C) Council for Mutual Economic Assistance
D) North American Free Trade Association
Q2) The European Union is primarily intended to permit:
A) Countries to adopt scientific tariffs on imports
B) An agricultural commodity cartel within the group
C) The adoption of export tariffs for revenue purposes
D) Free movement of resources and products among member nations
Q3) Which of the following organizations is considered a regional trading arrangement?
A) Organization of Petroleum Exporting Countries
B) North Atlantic Treaty Organization
C) Benelux
D) International Tin Agreement
Q4) What is meant by economic integration?
Q5) Explain the theory of optimum currency areas.
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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) What are the disadvantages of forming joint ventures?
Q2) Mexico's ____ refer to an assemblage of U.S.-owned companies that use U.S.-owned parts and Mexican assembly to manufacture goods that are exported to the United States.
A) Multinational corporations
B) International joint ventures
C) Maquiladoras
D) Transplants
Q3) Most vertical foreign investment, as implemented by multinational corporations, is "forward" in nature rather than "backward."
A)True
B)False
Q4) If a joint venture among competing firms is able to cut costs by extracting wage concessions from domestic workers, national welfare increases.
A)True
B)False
Q5) What are the typical ways in which multinational enterprises have diversified their operations?
Q6) What are Mexican maquiladoras?
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Chapter 10: The Balance of Payments
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99 Verified Questions
99 Flashcards
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Sample Questions
Q1) U.S. military aid granted to foreign countries is entered in the:
A) Merchandise trade account
B) Capital account
C) Current account
D) Official settlements account
Q2) The balance of international indebtedness is a record of a country's international:
A) Investment position over a period of time
B) Investment position at a fixed point in time
C) Trade position over a period of time
D) Trade position at a fixed point in time
Q3) A surplus on Germany's goods-and-services balance indicates that Germany has sold more goods and services to foreigners than it has bought from them over a one-year period.
A)True
B)False
Q4) That U.S. importers purchase bananas from Brazil constitutes a debit transaction on the U.S. balance of payments.
A)True
B)False
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Chapter 11: Foreign Exchange
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121 Verified Questions
121 Flashcards
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Sample Questions
Q1) Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, a decrease in the supply schedule causes an appreciation of the dollar against the pound.
A)True
B)False
Q2) Over time, a depreciation in the value of a nation's currency in the foreign exchange market will result in:
A) Exports rising and imports falling
B) Imports rising and exports falling
C) Both imports and exports rising
D) Both imports and exports falling
Q3) The demand for foreign exchange is derived from credit transactions on the balance of payments.
A)True
B)False
Q4) If it takes $1.5515 to buy 1 pound and $0.6845 to buy 1 franc, it takes 2.27 francs to buy 1 pound.
A)True B)False
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Chapter 12: Exchange-Rate Determination
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133 Verified Questions
133 Flashcards
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Sample Questions
Q1) According to exchange-rate overshooting, an appreciation of the Australian dollar is likely to be greater over a long time period than over a short time period.
A)True
B)False
Q2) Refer to Figure 12.1. Should the United States impose tariffs on imports from Switzerland, there would occur a (an):
A) Increase in the demand for francs and a depreciation of the dollar
B) Decrease in the demand for francs and an appreciation of the dollar
C) Decrease in the supply of francs and an appreciation of the dollar
D) Increase in the supply of francs and a depreciation of the dollar
Q3) According to the principle of exchange-rate overshooting, a short-run depreciation of a currency is likely to be greater than a long-run depreciation of that currency.
A)True
B)False
Q4) What is the asset market approach to exchange rate determination?
Q5) In a free market, what determines exchange rates in the long run and the short run?
Q6) What is exchange rate overshooting?
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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) Referring to Figure 13.4, Canada's marginal propensity to save equals 0.25 and marginal propensity to import equal 0.5.
A)True
B)False
Q2) Under the price-adjustment mechanism, trade-deficit nations realize price inflation and a loss of competitiveness while trade surplus nations realize price deflation and an improvement in competitiveness.
A)True
B)False
Q3) According to the equation of exchange, the total expenditures on final goods equals the monetary value of the final goods sold.
A)True
B)False
Q4) David Hume's price-adjustment mechanism supported the mercantilist view that a nation could maintain a trade surplus indefinitely.
A)True
B)False
Q5) 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
Source URL: https://quizplus.com/quiz/21366
Sample Questions
Q1) According to the absorption approach, the economic circumstances that best warrant a currency devaluation is where the domestic economy faces:
A) Unemployment coupled with a payments deficit
B) Unemployment coupled with a payments surplus
C) Full employment coupled with a payments deficit
D) Full employment coupled with a payments surplus
Q2) According to the J-curve effect, currency appreciation:
A) Decreases a trade surplus
B) Increases a trade surplus
C) Decreases a trade surplus before increasing a trade surplus
D) Increases a trade surplus before decreasing a trade surplus
Q3) The effect of currency depreciation on the purchasing power of money balances and the resulting impact on domestic expenditures is emphasized by the:
A) Absorption approach
B) Monetary approach
C) Fiscal approach
D) Elasticity approach
Q4) What is a pass-through relationship?
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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) The flexibility of floating rates may generate the problem of A) Inflationary bias
B) Deflationary bias
C) Continuous depreciation
D) Both a and c
Q2) Suppose that Japan maintains a pegged exchange rate that \(\underline { \text { overvalues } }\) the yen. This would likely result in:
A) Japanese exports becoming cheaper in world markets
B) Imports becoming expensive in the Japanese market
C) Unemployment for Japanese workers
D) Full employment for Japanese workers
Q3) The par values of most developing-country currencies are currently defined in terms of gold.
A)True
B)False
Q4) The Australian dollar is currently regarded is the key currency of the international monetary system.
A)True
B)False
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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) Given fixed exchange rates, assume Mexico initiates \(\underline { \text { contractionary } }\) monetary and fiscal policies to combat inflation. These policies will also:
A) Reduce a balance-of-payments surplus
B) Reduce a balance-of-payments deficit
C) Increases both imports and exports
D) Decrease both imports and exports
Q2) Exchange rate management policies require international policy coordination because a depreciation of one nation's currency implies an appreciation of its trading partner's currency.
A)True
B)False
Q3) Suppose the United States faces domestic recession and a current account deficit. Should the United States devalue the dollar, one would expect the:
A) Recession to become less severe--deficit to become less severe
B) Recession to become more severe--deficit to become less severe
C) Recession to become less severe--deficit to become more severe
D) Recession to become more severe--deficit to become more severe
Q4) What policy instrument should be used when demand-pull inflation exists?
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Chapter 17: International Banking: Reserves, Debt, and Risk
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96 Verified Questions
96 Flashcards
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Sample Questions
Q1) An advantage of international reserves is that they allow countries to sustain temporary balance-of-payments deficits until acceptable adjustment measures can operate to correct the disequilibrium.
A)True
B)False
Q2) Under a system of fixed exchange rates, international reserves are needed to bridge the gap between monetary receipts and monetary payments.
A)True
B)False
Q3) In the market for British Pounds the demand is represented by D<sub>0</sub> and supply by S<sub>0</sub>. If the exchange rate is flexible and the demand for pounds increases to D1, US monetary authorities will need to
A) supply 8 million pounds to the market
B) supply 4 million pounds to the market
C) supply 2 million pounds to the market
D) do nothing
Q4) Are international reserve needs different for different exchange rate regimes?
Q5) How can a bank reduce its exposure to the debt of developing nations?
Q6) Describe the eurocurrency market.
Page 19
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