International Financial Management Study Set 9

Business

Quiz 2 :

International Flow of Funds

Quiz 2 :

International Flow of Funds

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An increase in the current account deficit will place ____ pressure on the home currency value, other things equal.
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Multiple Choice
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Answer:

B

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If the home currency begins to appreciate against other currencies, this should ____ the current account balance, other things equal (assume that substitutes are readily available in the countries, and that the prices charged by firms remain the same).
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Answer:

C

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The J curve effect is the initial worsening of the UK trade balance due to a weakening dollar because of established trade relationships that are not easily changed; as the dollar weakens, the dollar value of imports initially rises before the UK trade balance is improved.
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True False
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True

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Which of the following theories identifies the non-transferability of resources as a reason for international business?
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The World Bank's Multilateral Investment Guarantee Agency (MIGA):
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An increase in the use of quotas is expected to:
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A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and possibly an initial investment in the franchise in exchange for periodic fees.
True False
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A tariff is a maximum limit on imports.
True False
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Changes in country ownership of long-term and short-term assets are measured in the balance of payments with the capital account.
True False
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Which of the following is not a commonly occurring subtle trade restriction?
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Imperfect markets represent conditions under which factors of production are immobile.
True False
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The World Bank was established to:
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Which of the following theories suggests that firms seek to penetrate new markets over time?
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A high home inflation rate relative to other countries would ____ the home country's current account balance, other things equal. A high growth in the home income level relative to other countries would ____ he home country's current account balance, other things equal.
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The standardization of product specifications throughout Europe during the 1990s removed a very large trade barrier.
True False
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Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) between countries that do not affect the transfer of control.
True False
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A weak home currency may not be a perfect solution to correct a balance of trade deficit because:
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The imperfect markets theory states that factors of production are somewhat immobile, allowing firms to capitalize on a foreign country's resources.
True False
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The current account represents the investment in fixed assets in foreign countries that can be used to conduct business operations.
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Direct foreign investment into the US represents a ____.
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