Question 1

A financial firm is thinking about discontinuing its foreign currency investments in the euro in favor of the yuan in order to increase its profits.If the following facts were known,which one would MOST weaken this idea?

Accepted Answer

Europe is showing signs of recovery,but China is showing signs of a downturn.

Question 2

The determination of whether a currency is overvalued or undervalued is based on a comparison with

Accepted Answer

the U.
S.
 dollar.

Question 3

The United Nations agency that provides only a limited scope of financial services,such as funding national improvements in undeveloped countries,is the

Accepted Answer

World Bank.

Question 4

Which is not a purpose of the International Monetary Fund?

Accepted Answer

Promote social programs in nations suffering from negative trade balances

Question 5

Some members of the Palau government want to ask the World Bank to help fund economic development,rather than focus on short-term monetary stimulation.Which of the following would strengthen the case for this course of action?

Accepted Answer

Palau suffers from widespread poverty.

Question 6

A government may ________ its currency to correct its balance-of-payments conditions.

Accepted Answer

devalue

Question 7

Which of the following would not be expected when a country's currency becomes overvalued?

Accepted Answer

The costs of exported goods declines.

Question 8

The law of one price

Accepted Answer

says that identical products should sell for the same price in all countries.

Question 9

One function of investment dealers is to

Accepted Answer

underwrite new stock and bond issues.

Question 10

According to the Big Mac index,

Accepted Answer

the price of a Big Mac is used as a comparison of foreign currencies being overvalued or undervalued.

Question 11

According to the Big Mac index,in 2012 the currency of ______ was overvalued,while the currency of ______ was undervalued.

Accepted Answer

Canada; India

Question 12

Which of the following is not a government supplier of funds to businesses in Canada?

Accepted Answer

Federal Bureau of Government Grants

Question 13

Which of the following statements is true regarding the international payments process?

Accepted Answer

Money does not actually have to flow between the two countries.

Question 14

The value of the Canadian dollar

Accepted Answer

reflects the overall supply and demand for Canadian dollars both at home and abroad.

Question 15

A company that sells energy drinks is preparing to sell its product outside Canada.The financial officer of the company wants to expand into South America because he believes that doing so will help the company generate a consistent year-round cash flow.If the following facts were known,which one would strengthen the CFO's argument?

Accepted Answer

Energy drinks sell much better at the hottest time of the year.

Question 16

The group of 188 nations that have combined resources to promote stable exchange rates,provide temporary short-term loans,and serve other purposes is the

Accepted Answer

International Monetary Fund (IMF).

Question 17

The law of one price says that

Accepted Answer

identical products should sell for the same price in all countries.

Question 18

The ________ makes term loans primarily to small firms judged to have growth potential but unable to secure funds on reasonable terms from traditional sources.

Accepted Answer

Export Development Corporation

Question 19

Financing new,untested businesses is risky,so the easiest route to financing would be to go to ________

Accepted Answer

a venture capital firm.

Question 20

The law of one price is

Accepted Answer

a principle that identical products should sell for the same price in all countries.

Quiz 18: Understanding Money and Banking