Worksheetstcqt mcq
Total questions: 77
Worksheet time: 39mins
The real interest rate adjusts the nominal interest rate for:
exchange rate movements
income growth
inflation
government controls
None of these are correct.
____ are not a factor that causes currency supply and demand schedules to change.
relative inflation rates
relative interest rates
relative income levels
expectations
All of these are factors that cause currency supply and demand schedules to change.
If the Fed announces that it will decrease U.S. interest rates, and the European Central Bank takes no action, then the value of the euro will ____ against the value of U.S. dollar (holding other factors constant).
be unchanged
depreciate
appreciate
depreciate but only briefly
Assume that British corporations begin to purchase more supplies from the United States as a result of several labor strikes by British suppliers. This action reflects:
an increased demand for British pounds.
a decrease in the demand for British pounds.
an increase in the supply of British pounds for sale.
a decrease in the supply of British pounds for sale.
If U.S. inflation suddenly increased while European inflation stayed the same, there would be:
a decreased U.S. demand for euros and a decreased supply of euros for sale.
an increased U.S. demand for euros and an increased supply of euros for sale.
a decreased U.S. demand for euros and an increased supply of euros for sale.
an increased U.S. demand for euros and a decreased supply of euros for sale.
Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?
store of value
medium of exchange
unit of account
None of the above is correct.
Which of the following best illustrates the medium of exchange function of money?
You keep some money hidden in your shoe.
You keep track of the value of your assets in terms of currency.
You pay for your double latte using currency.
None of the above is correct.
Economists use the word “money” to refer to
income generated by the production of goods and services.
those assets regularly used to buy goods and services.
the value of a person’s assets.
the value of stocks and bonds.
Liquidity refers to
the ease with which an asset is converted to the medium of exchange.
a measurement of the intrinsic value of commodity money.
the suitability of an asset to serve as a store of value.
how many time a dollar circulates in a given year.
Which list ranks assets from most to least liquid?
currency, fine art, stocks
currency, stocks, fine art
fine art, currency, stocks
fine art, stocks, currency
M1 includes
currency.
demand deposits.
travelers’ checks.
All of the above are correct.
Which of the following is not included in M1?
currency
demand deposits
savings deposits
travelers’ checks
Which of the following is included in M2 but not in M1?
currency
demand deposits
savings deposits
All of the above are included in both M1 and M2
M1 is
smaller and less liquid than M2.
smaller but more liquid than M2.
larger than and less liquid than M2.
larger than but more liquid than M2.
Savings deposits are included in
M1 but not M2.
M2 but not M1.
M1 and M2.
neither M1 nor M2.
Credit cards are
used as a method of payment.
part of the M1 money supply.
a method of deferring payment.
a unit of account.
Credit cards
defer payments.
are a store of value.
have led to wider use of currency.
are part of the money supply.
Debit cards M1
defer payments.
are equivalent to credit cards.
are included in M2.
are used as a method of payment.
When the Fed wants to change the money supply, it most frequently
changes the discount rate.
changes the reserve requirement.
conducts open market operations.
issues Federal Reserve notes.
When the Federal Reserve conducts open market transactions, it
issues Federal Reserve notes.
buys or sells government bonds from the public.
lowers the discount rate.
increases its lending to member banks.
When the Fed conducts open market purchases,
it buys Treasury securities, which increases the money supply.
it buys Treasury securities, which decreases the money supply.
it borrows from member banks, which increases the money supply.
it lends money to member banks, which decreases the money supply.
When the Fed conducts open market sales,
it sells Treasury securities, which increases the money supply.
it sells Treasury securities, which decreases the money supply.
it borrows from member banks, which increases the money supply.
it lends money to member banks, which decreases the money supply.
When the Fed conducts open market purchases,
it buys Treasury securities, which increases the money supply.
it buys Treasury securities, which decreases the money supply.
it sells Treasury securities, which increases the money supply.
it sells Treasury securities, which decreases the money supply.
The Fed can increase the money supply by conducting open market
sales and raising the discount rate.
sales and lowering the discount rate.
purchases and raising the discount rate.
purchases and lowering the discount rate.
The Fed can increase the price level by conducting open market
sales and raising the discount rate.
sales and lowering the discount rate.
purchases and raising the discount rate.
purchases and lowering the discount rate.
As the reserve ratio increases, the money multiplier
increases.
does not change.
decreases.
could do any of the above.
If the central bank in some country lowered the reserve ratio, the money multiplier
would increase.
would not change.
would decrease.
could do any of the above.
If the reserve ratio is 10 percent, the money multiplier is
100.
10.
9/10.
1/10.
If the reserve ratio is 20 percent, the money multiplier is
2.
4.
5.
8.
Which list contains only actions that increase the money supply?
raise the discount rate, make open market purchases
raise the discount rate, make open market sales
lower the discount rate, make open market purchases
lower the discount rate, make open market sales
Which list contains only actions that increase the money supply?
make open market purchases, raise the reserve requirement ratio
make open market purchases, lower the reserve requirement ratio
make open market sales, raise the reserve requirement ratio
make open market sales, lower the reserve requirement ratio
Which list contains only actions that decrease the money supply?
lower the discount rate, raise the reserve requirement ratio
lower the discount rate, lower the reserve requirement ratio
raise the discount rate, raise the reserve requirement ratio
raise the discount rate, lower the reserve requirement ratio
Which list contains only actions that decrease the money supply?
raise the discount rate, make open market purchases
raise the discount rate, make open market sales
lower the discount rate, make open market purchases
lower the discount rate, make open market sales
Which list contains only actions that decrease the money supply?
make open market purchases, raise the reserve requirement ratio
make open market purchases, lower the reserve requirement ratio
make open market sales, raise the reserve requirement ratio
make open market sales, lower the reserve requirement ratio
A strong dollar places ____ pressure on inflation, which in turn places ____ pressure on the dollar.
downward; upward
upward; downward
downward; downward
upward; upward
China's yuan is presently:
pegged to the euro.
allowed to fluctuate freely without any central bank intervention.
allowed to fluctuate but with central bank intervention.
pegged to the dollar.
Assume a central bank exchanges its currency for other foreign currencies in the foreign exchange market, but does not adjust for the resulting change in the money supply. This is an example of:
indirect intervention
pegged intervention
pegged intervention AND sterilized intervention
sterilized intervention
nonsterilized intervention
To strengthen the dollar using sterilized intervention, the Fed would ____ dollars and simultaneously ____ Treasury securities.
sell; buy
buy; buy
buy; sell
sell; sell
As foreign exchange activity has grown, a given degree of central bank intervention has become:
more effective
None of these are correct
less effective
more frequent
Which of the following is an example of direct intervention in foreign exchange markets?
imposing barriers on international trade
lowering interest rates
exchanging dollars for foreign currency
increasing the inflation rate
Countries that have adopted the euro tend to have very similar ____.
interest rates
inflation rates
income tax rates
budget deficits
The euro is the currency
adopted in all western European countries as of 1999
adopted in all eastern European countries as of 1999.
adopted in all European countries as of 1999.
None of these are correct.
Under a fixed exchange rate system
a foreign exchange market does not exist.
central bank intervention in the foreign exchange market is often necessary.
central bank intervention in the foreign exchange market is not allowed.
central bank intervention in the foreign exchange market is not necessary.
Countries that have adopted the euro must agree on a single ____ policy.
worker compensation
fiscal
foreign relations
monetary
Which of the following could reduce agency problems for an MNC?
stock options as managerial compensation
investor monitoring
hostile takeover threat
All of these are forms of corporate control that could reduce agency problems for an MNC
Due to the risks involved in international business, firms should:
maintain international business to no more than 20% of total business
None of these are correct.
only consider international business in major countries.
maintain international business to no more than 35% of total business.
The agency costs of an MNC are likely to be lower if it:
scatters its subsidiaries across many foreign countries AND increases its volume of international business.
uses a centralized management style
increases its volume of international business.
scatters its subsidiaries across many foreign countries.
For an MNC, agency costs are typically:
the same as agency costs of a small purely domestic firm
nonexistent
smaller than agency costs of a small purely domestic firm
larger than agency costs of a small purely domestic firm.
Four MNCs generate the same level of sales. The MNC that ______________________would likely have the most direct foreign investment
imports products from unrelated firms in other countries and sells them locally
exports all of its products
produces and sells its products locally
acquires a foreign firm that produces most of its products to be sold in that foreign country
The commonly accepted goal of an MNC is to:
maximize international sales.
maximize shareholder wealth
maximize short-term earnings
aximize short-term earnings AND minimize risk.
minimize risk
Which of the following theories identifies the non-transferability of resources as a reason for international business?
imperfect markets theory
theory of comparative advantage
product cycle theory
None of these are correct.
Licensing obligates a firm to provide ____, while franchising obligates a firm to provide ____.
a specialized sales or service strategy; a specialized sales or service strategy
its technology; its technology
its technology; an initial investment
its technology; a specialized sales or service strategy
a specialized sales or service strategy; its technology
Which of the following theories identifies specialization as a reason for international business?
imperfect markets theory
None of these are correct
product cycle theory
theory of comparative advantage
Which of the following theories suggests that firms seek to penetrate new markets over time
product cycle theory
imperfect markets theory
theory of comparative advantage
None of these are correct.
Of the following, exchange rates depend the most upon relative
monetary systems
political systems
trade deficits
inflation rates between nations
The price of foreign goods in terms of domestic goods is called
the real exchange rate
the balance of trade
the trade-weighted exchange rate
purchasing parity
If a foreigner purchases a U.S. government security the
supply of dollars rises
federal government deficit declines
demand for dollars rises
U.S. money supply rises
An increase in the real exchange rate will
raise national income
lower national income
make a country less competitive in international trade
lower the cost of foreign goods
c and d
A slowdown in U.S. economic growth will
boost the value of the dollar because inflation fears will be calmed
boost the value of the dollar because the Federal Reserve will expand the money supply
lower the value of the dollar because the U.S. will be a less attractive place to investors
lower the value of the dollar because interest rates will rise
The willingness of people to hold money
increases with the interest rate
rises with price stability
rises with national income
b and c only
Sound economic policies will
raise the value of a nation's currency by boosting the economy
lower the value of a nation's currency by increasing the precautionary demand for money
lower the value of a nation's currency by leading to lower interest rates
both b and c
An increase in the supply of U.S. dollars by the Federal Reserve will
raise the value of the dollar because it will stimulate U.S. economic growth
raise the value of the dollar because it will lead to higher U.S. interest rates
reduce the value of the dollar because of inflation fears in the United States
decrease the value of the dollar because it will force other countries to raise their interest rates
Which of the following is an example of foreign exchange market intervention?
the U.S. government pays Social Security checks to pensioners living in Poland
IBM sells euros it received in international trade
the Canadian government pays interest to Saudi Arabian investors
the French government sells dollars in the foreign exchange market to prop up the value of the euro
The _______ for/of foreign currency in the U.S. is derived from the demand for ___________ by American consumers.
Demand, foreign products
Demand, tax loopholes
Supply, lower tariffs
Supply, local products
____ is not a factor that causes currency supply and demand schedules to change.
Relative inflation rates
Relative interest rates
Relative income levels
Expectations
All of the above are factors that cause currency supply and demand schedules to change.
A large increase in the income level in Mexico along with no growth in the U.S. income level is normally expected to cause (assuming no change in interest rates or other factors) a(n) ____ in Mexican demand for U.S. goods, and the Mexican peso should ____.
increase; appreciate
increase; depreciate
decrease; depreciate
decrease; appreciate
An increase in U.S. interest rates relative to German interest rates would likely ____ the U.S. demand for euros and ____ the supply of euros for sale.
reduce; increase
increase; reduce
reduce; reduce
increase; increase
Investors from Germany, the United States, and the U.K. frequently invest in each other based on prevailing interest rates. If British interest rates increase, German investors are likely to buy ____ dollar-denominated securities, and the euro is likely to ____ relative to the dollar.
fewer; depreciate
fewer; appreciate
more; depreciate
more; appreciate
When the "real" interest rate is relatively low in a given country, then the currency of that country is typically expected to be:
weak, since the country's quoted interest rate would be high relative to the inflation rate.
strong, since the country's quoted interest rate would be low relative to the inflation rate
strong, since the country's quoted interest rate would be high relative to the inflation rate.
weak, since the country's quoted interest rate would be low relative to the inflation rate.
Assume that the inflation rate becomes much higher in the U.K. relative to the U.S. This will place ____ pressure on the value of the British pound. Also, assume that interest rates in the U.K. begin to rise relative to interest rates in the U.S. The change in interest rates will place ____ pressure on the value of the British pound.
upward; downward
upward; upward
downward; upward
downward; downward
Assume that Swiss investors have francs available to invest in securities, and they initially view U.S. and British interest rates as equally attractive. Now assume that U.S. interest rates increase while British interest rates stay the same. This would likely cause:
the Swiss demand for dollars to decrease and the dollar will depreciate against the pound
the Swiss demand for dollars to increase and the dollar will depreciate against the Swiss franc
the Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc.
the Swiss demand for dollars to decrease and the dollar will appreciate against the pound.
If U.S. inflation suddenly increased while European inflation stayed the same, there would be:
an increased U.S. demand for euros and an increased supply of euros for sale.
a decreased U.S. demand for euros and an increased supply of euros for sale.
a decreased U.S. demand for euros and a decreased supply of euros for sale.
an increased U.S. demand for euros and a decreased supply of euros for sale.
If inflation in New Zealand suddenly increased while U.S. inflation stayed the same, there would be:
an inward shift in the demand schedule for NZ$ and an outward shift in the supply schedule for NZ$.
an outward shift in the demand schedule for NZ$ and an inward shift in the supply schedule for NZ$.
an outward shift in the demand schedule for NZ$ and an outward shift in the supply schedule for NZ$.
an inward shift in the demand schedule for NZ$ and an inward shift in the supply schedule for NZ$.
If the U.S. and Japan engage in substantial financial flows but little trade, ____ directly influences their exchange rate the most. If the U.S. and Switzerland engage in much trade but little financial flows, ____ directly influences their exchange rate the most.
interest rate differentials; interest rate differentials
inflation and interest rate differentials; interest rate differentials
income and interest rate differentials; inflation differentials
interest rate differentials; inflation and income differentials
inflation and income differentials; interest rate differentials
If inflation increases substantially in Australia while U.S. inflation remains unchanged, this is expected to place ____ pressure on the value of the Australian dollar with respect to the U.S. dollar.
Upward
Downward
either upward or downward (depending on the degree of the increase in Australian inflation)
none of the above; there will be no impact
Assume that British corporations begin to purchase more supplies from the U.S. as a result of several labor strikes by British suppliers. This action reflects:
an increased demand for British pounds.
a decrease in the demand for British pounds.
an increase in the supply of British pounds for sale.
a decrease in the supply of British pounds for sale.
The exchange rates of smaller countries are very stable because the market for their currency is very liquid.
False
True
