International Economics International Edition 12th Edition by Robert Carbaugh – Test Bank

Exam Kit for the 12th Edition of Economics on Global Scale by Robert Carbaugh

1. Suppose you are an American exporter expecting to receive 50 pounds sterling in 60 days. To eliminate the risk of devaluation of the pound sterling, you can:
a. Hedge by selling sterling in the forward market for 60-day delivery
b. Purchase sterling now and sell it after 60 days
c. Exchange the dollar equivalent in the forward market for 60-day delivery
d. Retain the sterling in Britain after receipt

ANS: A SCORE: 1

2. Which of the following factors tends to result in the appreciation of the U.S. dollar?
a. Surge in U.S. prices compared to foreign prices
b. Rapid economic growth in foreign countries
c. Decline in U.S. interest rates below foreign levels
d. Increase in U.S. income levels

ANS: B SCORE: 1

3. In terms of managing foreign exchange risks–if an anticipated depreciation of the domestic currency is expected, there is an incentive for:
a. Exporters to quickly hedge their future requirements
b. Importers to quickly hedge their future requirements
c. Both exporters and importers to quickly hedge their future requirements
d. Neither exporters nor importers to quickly hedge their future requirements

ANS: B SCORE: 1

4. When short-term interest rates become lower in Tokyo than in New York, interest arbitrage activities are likely to lead to:
a. Rise in the yen’s spot price
b. Increase in the forward price of the dollar
c. Selling of dollars in the forward market
d. Purchase of yen in the spot market

ANS: C SCORE: 1

5. An increase in the value of the U.S. dollar against the British pound would likely:
a. Deter the British from purchasing American goods
b. Deter Americans from purchasing British goods
c. Expand the quantity of dollars that can be bought with a pound
d. Deter U.S. travelers from going to Britain

ANS: A SCORE: 1

6. Concerning the foreign exchange market, it can be said that:
a. There exists a spot market for almost every currency globally
b. The market is highly decentralized unlike the stock exchange
c. Most foreign exchange transactions are conducted using banknotes
d. The values of the forward and spot rates are consistently aligned

ANS: A SCORE: 1

7. If research reveals that Swiss beer causes cancer when consumed in large amounts by British mice, this discovery would likely lead to:
a. Decrease in the demand for Swiss francs
b. Increase in the supply of Swiss francs
c. Increase in the demand for Swiss francs
d. Decrease in the supply of Swiss francs

ANS: A SCORE: 1

8. Assuming real incomes rise more rapidly in the United States than in Mexico. In the U.S., this scenario would likely lead to:
a. Increase in the demand for pesos
b. Decrease in the supply of pesos
c. Decrease in the demand for pesos
d. Increase in the supply of pesos

ANS: A SCORE: 1

9. A depreciation of the dollar means:
a. Downward movement in the dollar value of foreign currency
b. Rise in the dollar value of foreign currency
c. Reduction of foreign exchange reserves for the U.S.
d. An intervention in the global money market

ANS: B SCORE: 1

10. If Canadian investors anticipated a Swiss franc appreciation against the U.S. dollar, they would likely:
a. Purchase Swiss francs
b. Purchase Canadian dollars
c. Purchase U.S. dollars
d. Sell Swiss francs