Exam 3 10-13 Flashcards
The foreign exchange market offers complete insurance against foreign exchange risk:
False
The purchasing power parity (PPP) theory tells us that a country with a high inflation rate will see:
Depreciation in its currency exchange rate
Which of the following is true of inflation?
It occurs when the quantity of money in circulation rises faster than the stock of goods and services.
Which of the following states that for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between two countries?
International Fisher effect
Which of the following is a function of the foreign exchange market?
To provide some insurance against foreign exchange risk.
___ refers to the extent to which the income from the individual transactions is affected by fluctuations in the foreign exchange values
Transaction exposure
A lag strategy involves
Delaying the collection of foreign currency receivables when a foreign currency is expected to appreciate
World auto group, based in California, buys components parts from Indonesia. The Indonesian company must be paid in rupiah. World auto group will rely on __________ to convert dollars to rupiah
foreign exchange market
When a firm enters into a spot exchange contract it is taking out insurance against adverse future exchange rate movements.
False
Which of the following has no impediments to the free flow of goods and services, such as trade barriers
efficient markets
How does the international monetary fund provide loans to deficit-laden countries?
A pool of gold and currencies contributed by its members provides the resources for lending operations.
Vornada inc, is a multinational clothing and accessory brand, has been facing huge economic losses due to unpredictable exchange rate movements. In order to gain considerate immunity against such currency fluncuations, Vornada Inc should,
Disperse production in different locations around the globe
Which of the following statements is true about a currency board system?
Under a strict currency board system, interest rates adjust automatically based on supply and demand of domestic currency
Why were Great Britain the United States able to finance their deficites by borrowing private money since the 1970s?
Rapid development of global capital markets
A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.
True
Under a currency board system, the government has the absolute authority to set interest rates.
False
Under the 1976 Jamaica agreement, gold was abandoned as a reserve asset.
True
According to the Bretton woods agreement, if a currency becomes too weak to defend, a devaluation of up to 10% would be allowed without any formal approval by the international monetary fund
True
In a floating exchange rate, the relative value of a currency
Its determined by market forces
Which of the following was the weakness of the Bretton woods system>
It could not work if the US dollar was under speculative attack.
According to Michael porter, what are the two basic strategies for creating value and attaining a competitive advantage in an industry?
Differentiation and low-cost
A ______ focuses on increasing profitability by customizing the firms goods or services so that they provide a good match to tastes and preferences in different national markets.
Localization strategy
A firms profitability is maximized when it
Ensures that it has the right organization structure in place to execute its strategy
Which of the following is a support activity in the operations of a firm?
Creation and maintenance of information system
How does possessing a core competence help a firm?
It enables a firm to reduce costs of value creation.
What strategy focuses on increasing profitability by customizing the firms goods and services so that they provide a good match to tastes and preferences in different national markets?
Localization strategy
Firms that operate internationally are able to realize location economics by dispersing individual value creation activities to locations to where they are performed most efficiently and effectively
True
What creates value by discovering consumer needs and communicating them back to the R&D function of the company, which can then design products to better match those needs?
Marketing and sales
By using significant standardization in the use of aircrafts and by streamlining its operations, southwest airlines competes by offering its flights at a lower price than the competition. According to Michael Porter, southwest is using the
Low cost strategy
What creates a perception of superior value in the minds of consumers by solving consumer problems and by supporting them after they have purchased the product.
Customer service
A firm contemplating expansion should chase a foreign market based on an assessment of the nations long-run profits potential
true
The risks associated with learning to do with business in a new culture are less if the firm
acquires an established host country enterprise
Which of the following is true of the costs and risks associated with doing business in a foreign country?
They are lower in economically advanced nations
Which of the following is an advantage of franchising as a mode of entry into foreign markets?
The franchiser is relieved of money of the costs and risks of opening a foreign market on its own.
Which of the following situations can an international business command higher prices for a particular product in a foreign market?
The product offers greater value to customers in a foreign market
The attractiveness of a country as a potential market for an international business depends solely on the size of its consumer market?
False
An advantage of choosing exporting as a mode of entry into a foreign markets is that a firm,
can avoid the costs of establishing manufactoring operations in the host country
Why do acquisitions fail somtimes?
There is a clash between the cultures of the acquiring and acquired firms
Which of the following is a method to established a wholly owned subsidiary in a foreign market?
By acquiring an established firm in the host nation
Which of the following is an advantage of joint ventures a as mode of entry into foreign markets?
The foreign firm benefits from a local partner knowledge of the host country
