International Financial Management
Exam Questions
Course Introduction
International Financial Management explores the principles and practices of managing financial resources in a global context. Students will learn about foreign exchange markets, international financial instruments, risk management techniques, and the impact of exchange rate fluctuations on multinational corporations. The course covers topics such as international capital budgeting, cross-border financing, and the regulatory environment affecting global financial operations, equipping students with the analytical tools needed to make informed financial decisions in an international setting.
Recommended Textbook
International Finance Theory and Policy 10th Edition by Paul R. Krugman
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12 Chapters
706 Verified Questions
706 Flashcards
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Chapter 1: Introduction
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Sample Questions
Q1) An important insight of international trade theory is that when two countries engage in voluntary trade
A) one country always benefits at the expense of the other.
B) it is almost always beneficial to both countries.
C) it only benefits the low wage country.
D) it only benefits the high wage country.
E) it is almost never beneficial to both countries.
Answer: B
Q2) 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
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Chapter 2: National Income Accounting and the Balance of Payments
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Sample Questions
Q1) 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.
Q2) For open economies,
A) S = I.
B) S = I + CA.
C) S = I - CA.
D) S > I + CA.
E) S < I + CA.
Answer: B
Q3) "The balance of payments is seldom in balance in practice." Discuss.
A)True
B)False
Answer: True
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Chapter 3: Labor Productivity and Comparative Advantage: The Ricardian Model
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Sample Questions
Q1) If a very small country trades with a very large country according to the Ricardian model,then
A) the small country will suffer a decrease in economic welfare.
B) the large country will suffer a decrease in economic welfare.
C) the small country only will enjoy gains from trade.
D) the large country will enjoy gains from trade.
E) both countries will enjoy equal gains from trade.
Answer: C
Q2) If the world terms of trade for a country are somewhere between the domestic cost ratio of H and that of F,then
A) country H but not country F will gain from trade.
B) country H and country F will both gain from trade.
C) neither country H nor F will gain from trade.
D) only the country whose government subsidizes its exports will gain.
E) country F but not country H will gain from trade.
Answer: B
Q3) 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.
Page 5
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Chapter 4: Specific Factors and Income Distribution
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Sample Questions
Q1) In the specific factors model,a country's production function is ________ because of ________.
A) a straight line; diminishing marginal returns
B) a curved line; diminishing marginal returns
C) a straight line; constant marginal returns
D) a curved line; constant marginal returns
E) a curved line; a limited supply of labor
Q2) In the four-quadrant diagram of the specific factors model,the graph in the upper left quadrant is a country's
A) production function for food.
B) production possibility frontier.
C) labor allocation constraint.
D) production function for cloth.
E) labor supply curve.
Q3) The specific factors model was developed by
A) Paul Samuelson and Ronald Jones.
B) Adam Smith and David Ricardo.
C) Richard Nixon and Robert Kennedy.
D) C.B. deMille and Gordon Willis.
E) Bill Clinton and Monica Lewinsky.
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Chapter 5: Resources and Trade: The Heckscher-Ohlin Model
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Sample Questions
Q1) The Case of the Missing Trade refers to
A) the fact that factor trade is less than predicted by the Heckscher-Ohlin theory.
B) the 9th volume of the Hardy Boys' Mystery series.
C) the fact that world exports does not equal world imports.
D) the fact that the Heckscher Ohlin theory predicts much less volume of trade than actually exists.
E) the fact that the Heckscher Ohlin theory never applies to China-U.S. trade practices.
Q2) International trade leads to complete equalization of factor prices.Discuss.
Q3) "No country is abundant in everything." Discuss.
Q4) Why are prices of factors of production NOT equalized?
Q5) One way in which the Heckscher-Ohlin model differs from the Ricardo model of comparative advantage is by assuming that ________ is (are)identical in all countries.
A) factor endowments
B) scale of production
C) factor intensities
D) technology
E) opportunity costs
Page 7
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Chapter 6: The Standard Trade Model
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Sample Questions
Q1) If Slovenia were a large country in world trade,then if it instituted a large set of subsidies for its exports,this must
A) improve the real income of its trade partners.
B) cause retaliation on the part of its trade partners.
C) harm Slovenia's real income.
D) improve Slovenia's real income.
E) increase internal prices above the world market rate.
Q2) An export subsidy will cause the terms of trade of the ________ country to ________ and will ________ the country.
A) exporting; suffer; harm
B) exporting; improve; benefit
C) importing; suffer; harm
D) importing; suffer; benefit
E) importing; improve; harm
Q3) The price of ________ consumption in terms of ________ consumption is
A) future; current; 1/(1 + r)
B) present; future; 1/(1 + r)
C) future; current; r
D) present; future; r
E) future; current; 1 + r
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Chapter 7: External Economies of Scale and the
International Location of Production
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Sample Questions
Q1) If a firm's output more than doubles when all inputs are doubled,production is said to occur under conditions of
A) increasing returns to scale.
B) imperfect competition.
C) intra-industry equilibrium.
D) constant returns to scale
E) decreasing returns to scale.
Q2) Restaurant meals are an example of a ________ good and clothing is an example of a ________ good.The pattern of interregional trade is determined primarily by
A) nontraded; traded; external economies.
B) traded; nontraded; internal economies
C) nondurable; durable; natural resource
D) durable; nondurable; natural resources
E) consumer; style; population
Q3) 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?
Q4) Why are increasing returns to scale and fixed costs important in models of international trade and imperfect competition?
Page 9
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Chapter 8: Firms in the Global Economy: Export
Decisions,Outsourcing,and Multinational Enterprises
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Sample Questions
Q1) An imperfectly competitive firm has the following demand curve: Q = 100 - 2P.What is marginal revenue equal to when P = 30?
Q2) An imperfectly competitive firm has the following total cost curve: C = 100 + 4Q.What is marginal cost equal to when Q = 10?
Q3) Intra-industry trade will tend to dominate trade flows when which of the following exists?
A) small differences between relative country factor availabilities
B) large differences between relative country factor availabilities
C) homogeneous products that cannot be differentiated
D) constant cost industries
E) uneven distribution of abundant resources between two countries
Q4) International trade based on external scale economies in both countries is likely to be carried out by
A) a relatively large number of price competing firms.
B) a relatively small number of price competing firms.
C) a relatively small number of imperfect competitors.
D) monopolists in each country.
E) a large number of oligopolists in each country.
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Q5) What are the consequences of outsourcing production on the welfare of countries?
Chapter 9: The Instruments of Trade Policy
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Sample Questions
Q1) A voluntary export restraint will ________ producer surplus,________ consumer surplus,________ government revenue,and ________ overall domestic national welfare.
A) increase; decrease; increase; have an ambiguous effect on B) increase; decrease; decrease; decrease C) increase; decrease; have no effect on; have an ambiguous effect on D) increase; decrease; have no effect on; decrease E) increase; increase; decrease; have an ambiguous effect on
Q2) Refer to above figure.The loss of Consumer Surplus due to the tariff equals ________.
Q3) Refer to above figure.What is the amount of government revenue resulting from imposition of the tariff?
Q4) Refer to above figure.With a specific tariff of $3 per unit,what is the quantity of Widgets produced domestically?
Q5) In the country levying the tariff,the tariff will
A) increase both consumer and producer surplus.
B) decrease both the consumer and producer surplus.
C) decrease consumer surplus and increase producer surplus.
D) increase consumer surplus and decrease producer surplus.
E) decrease consumer surplus but leave producers surplus unchanged.
Page 11
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Chapter 10: The Political Economy of Trade Policy
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Sample Questions
Q1) Refer to above figure.Assume that Boeing is the first to enter the Hungarian market.Without a government subsidy what price would they demand,and what would be their total profits?
Q2) The WTO's intervention against clean air standards
A) has earned it universal approval.
B) was done in order to limit national sovereignty.
C) has resulted in much criticism.
D) has resulted in much criticism among professional economists.
E) was championed in developing countries.
Q3) The average tariff rate dutiable imports in the United States is approximately
A) less than 10 % of the value of imports.
B) 15% of the value of imports.
C) 20 % of the value of imports.
D) 25% of the value of imports.
E) more than 30% of the value of imports.
Q4) It has been claimed that foreign governments have attempted to influence votes in the U.S.that would promote policies of protectionism within the U.S.On the surface this appears to be totally illogical and counter intuitive,as this would presumably lessen the possibilities of foreigners' exports to the U.S.
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Chapter 11: Trade Policy in Developing Countries
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Sample Questions
Q1) To help developing nations strengthen their international competitiveness,many industrial nations have granted tariff reductions to developing nations under the
A) international commodity agreements program.
B) multilateral contract program.
C) generalized system of preferences program.
D) export led growth program.
E) import substitution policy.
Q2) All the following nations except ________ have recently utilized export-led growth policies.
A) Hong Kong
B) South Korea
C) Argentina
D) Singapore
E) Taiwan
Q3) It is argued that import substitution is a misguided trade policy if the intent is to promote long-term economic growth.Explain the reasons underlying this argument.
Q4) Refer to above figure.If manufacturing labor were to increase to OmL2,how much value would the economy as a whole gain?
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Chapter 12: Controversies in Trade Policy
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Sample Questions
Q1) The Shipbreakers of Alang represent a perfect example of how a developing country can apply the principles of the Heckscher-Ohlin model,since
A) shipbreaking is generally considered to be a capital-intensive operation and India, being a large country has much capital.
B) shipbreaking is a labor-intensive operation in India, and India has many workers since it is such a large country.
C) shipbreaking is a labor-intensive operation in India, and India's availability of capital per worker is less than that of its trade partners.
D) shipbreaking is a capital-intensive operation elsewhere in the world, and therefore represents a case of a factor intensity reversal.
E) India's climate lends itself to the work involved in shipbreaking.
Q2) Refer to the above table.Suppose the U.S.government (but not Europe)offers a $10 million subsidy?
Q3) Refer to the above table.Suppose both governments offer their respective company a $10 million subsidy.
Q4) Describe the environmental Kuznets curve.
Q5) What is a pollution haven?
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