Question 1

A stronger Korean won, remembering that Kia cars sold in the United States are paid for in dollars, means what for Kia?

Accepted Answer

A)  a need to hedge Japanese yen
B)  a use for the Euro, a neutral currency
C)  less profit
D)  a use for gold to protect against currency fluctuations
E)  more profitF) D) and E)
G) A) and B)

Question 2

One function of the foreign exchange market is to provide some insurance against the risks that arise from changes in exchange rates, commonly referred to as:

Accepted Answer

A)  foreign market hazard.
B)  global jeopardy.
C)  foreign exchange risk.
D)  commerce uncertainty.
E)  trade payment riskF) A) and E)
G) D) and E)

Question 3

If an Canadian grain company exported corn to Russia, and instead of receiving nonconvertible Russian currency in exchange for the corn received Russian crude oil, that would be an example of ______________.

Accepted Answer

A)  counter trade
B)  synergistic trade
C)  separate trade
D)  reciprocal trade
E)  barter tradeF) All of the above
G) None of the above

Question 4

The ______________ is the rate at which the market converts one currency into another.

Accepted Answer

A)  international conversion factor
B)  world barter factor
C)  foreign exchange rate
D)  global replacement percentage
E)  discount rateF) A) and E)
G) A) and B)

Question 5

If the prices differed in London and New York and a dealer spent $1 million to purchase ¥125 million, then sold that ¥125 immediately for $1.046666 million, the trader would earn a profit of $46,666 on the transaction.This is accomplished through

Accepted Answer

A)  arbitrage
B)  skimming
C)  FDI.
D)  pre exchange agreements
E)  buying low and selling highF) A) and B)
G) A) and C)

Question 6

What is the International Fisher Effect? (note: you do not need to provide the mathematical formula provided in the book)

Accepted Answer

The International Fisher Effect states t...

Question 7

According to the ______________, identical products sold in different countries must sell for the same price when their price is expressed in the same currency in competitive markets free of transportation costs and barriers to trade.

Accepted Answer

A)  model of fair pricing
B)  law of purchasing power equity
C)  principle of equitable pricing
D)  principle of consistent pricing
E)  law of one priceF) A) and E)
G) B) and D)

Question 8

Canadian businesses will normally use the ________________ in international transactions.

Accepted Answer

A)  The German mark
B)  The Euro
C)  The U.S.dollar
D)  The Japanese yen
E)  The British poundF) B) and D)
G) A) and E)

Question 9

The process of buying a currency low and selling it high at the same time is called

Accepted Answer

A)  forward exchange.
B)  skimming
C)  profiteering
D)  arbitrage
E)  hedgingF) C) and D)
G) A) and B)

Question 10

In addition to altering the value of trade deals and foreign investments, currency movements can also open or close export opportunities and alter the attractiveness of imports.

Accepted Answer

A) True 
 B)False

Question 11

A less extreme version of the PPP theory state that given _____________ the price of a "basket of goods" should be roughly equivalent in each country.

Accepted Answer

A)  tolerant markets
B)  relatively efficient markets
C)  classical markets
D)  closed markets
E)  free marketsF) B) and C)
G) C) and D)

Question 12

The majority of the countries in the world have currency that is freely convertible.

Accepted Answer

A) True 
 B)False

Question 13

Most economic theories suggest that three import factors have an important impact on future exchange rate movements in a country's currency.These factors are

Accepted Answer

A)  the country's price inflation, its interest rate, and its market philosophy.
B)  the country's rate of GNP, its unemployment rate, and its economic policy.
C)  the country's participation in the World Trade Organization, its monetary policy, and its market philosophy.
D)  the country's rate of economic growth, its participation in the World Trade Organization, and its economy policy.
E)  the country's economic policy, its trade balance, and its national deficitsF) C) and E)
G) C) and D)

Question 14

The foreign exchange market serves two main functions.These are

Accepted Answer

A)  collect duties on imported products and convert the currency of one country into the currency of another.
B)  insure companies against foreign exchange risk and set interest rates charged to foreign investors.
C)  collect duties on imported products and set interest rates charged to foreign investors.
D)  convert the currency of one country into the currency of another and provide some insurance against foreign exchange risk.
E)  reduce the trade imbalances between countries and convert the currency of one country into another.F) A) and C)
G) None of the above

Question 15

What do many Canadian businesspeople NOT buy into with respect to the value of the Canadian dollar?

Accepted Answer

A)  A stronger dollar will result in more outbound tourism.
B)  A weaker dollar is good for tourists coming to Canada
C)  A stronger dollar means that Canadian resources are more in demand
D)  A weaker dollar will make imports more expensive
E)  A stronger dollar will reduce demand for Canada's exports.F) C) and E)
G) A) and B)

Question 16

The _____________ is a market for converting the currency of one country into that of another.

Accepted Answer

A)  foreign exchange market
B)  cross-cultural interchange
C)  financial barter market
D)  monetary replacement market
E)  international currency spot marketF) None of the above
G) B) and C)

Question 17

The value of a currency is determined by

Accepted Answer

A)  the interaction between the demand and supply of that currency relative to the demand and supply of other currencies.
B)  a consortium of international currency traders.
C)  the World Trade Organization.
D)  negotiations between the central banks of the leading five industrial powers of the world.
E)  currency speculatorsF) A) and B)
G) None of the above

Question 18

A(n)  _______________ is a market in which few impediments to international trade and investment exist.

Accepted Answer

A)  relatively efficient market
B)  consistently inefficient market
C)  absolutely free market
D)  absolutely closed
E)  free marketF) A) and B)
G) B) and E)

Question 19

One feature of the London exchange market is _____________

Accepted Answer

A)  Lower exchange fees
B)  Higher margins
C)  New investment products
D)  The ability to short the market
E)  Its geography between the Tokyo and New York MarketsF) All of the above
G) A) and E)

Question 20

______________ refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.

Accepted Answer

A)  Separate trade
B)  Reciprocal trade
C)  Counter trade
D)  Alternative trade
E)  Cashless tradeF) A) and B)
G) A) and D)

Exam 9: The Foreign Exchange Market

The majority of the countries in the world have currency that is freely convertible.

Correct AnswerverifiedShow Answer

One function of the foreign exchange market is to provide some insurance against the risks that arise from changes in exchange rates, commonly referred to as:

Correct AnswerverifiedShow Answer

According to the ______________, identical products sold in different countries must sell for the same price when their price is expressed in the same currency in competitive markets free of transportation costs and barriers to trade.

Correct AnswerverifiedShow Answer

One feature of the London exchange market is _____________

Correct AnswerverifiedShow Answer

Canadian businesses will normally use the ________________ in international transactions.

Correct AnswerverifiedShow Answer

A(n) _______________ is a market in which few impediments to international trade and investment exist.

Correct AnswerverifiedShow Answer

In addition to altering the value of trade deals and foreign investments, currency movements can also open or close export opportunities and alter the attractiveness of imports.

Correct AnswerverifiedShow Answer

Most economic theories suggest that three import factors have an important impact on future exchange rate movements in a country's currency.These factors are

Correct AnswerverifiedShow Answer

What is the International Fisher Effect? (note: you do not need to provide the mathematical formula provided in the book)

Correct AnswerverifiedThe International Fisher Effect states t...View AnswerShow Answer

The foreign exchange market serves two main functions.These are

Correct AnswerverifiedShow Answer

A less extreme version of the PPP theory state that given _____________ the price of a "basket of goods" should be roughly equivalent in each country.

Correct AnswerverifiedShow Answer

If the prices differed in London and New York and a dealer spent $1 million to purchase ¥125 million, then sold that ¥125 immediately for $1.046666 million, the trader would earn a profit of $46,666 on the transaction.This is accomplished through

Correct AnswerverifiedShow Answer

The value of a currency is determined by

Correct AnswerverifiedShow Answer

The ______________ is the rate at which the market converts one currency into another.

Correct AnswerverifiedShow Answer

The _____________ is a market for converting the currency of one country into that of another.

Correct AnswerverifiedShow Answer

______________ refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.

Correct AnswerverifiedShow Answer

What do many Canadian businesspeople NOT buy into with respect to the value of the Canadian dollar?

Correct AnswerverifiedShow Answer

If an Canadian grain company exported corn to Russia, and instead of receiving nonconvertible Russian currency in exchange for the corn received Russian crude oil, that would be an example of ______________.

Correct AnswerverifiedShow Answer

The process of buying a currency low and selling it high at the same time is called

Correct AnswerverifiedShow Answer

A stronger Korean won, remembering that Kia cars sold in the United States are paid for in dollars, means what for Kia?

Correct AnswerverifiedShow Answer

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The International Fisher Effect states t...
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