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IMS > Quiz 2 > Flashcards

Quiz 2 Flashcards

1
Q

1) Because of the importance of economic information to the control and planning functions at headquarters, the collection of data and preparation of reports are usually the responsibility of

A)    the home office.	
B)    national agencies.
C)    economic consultants.
D)    the international affiliate.
A

A) the home office.

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2
Q

2) A measure of an economy’s size based on the market value of goods and services produced within a nation in a year is

A)    net national income.	
B)    gross domestic product.
C)    gross national product.
D)    gross national income.
A

B) gross domestic product.

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3
Q

3) As a general rule, the underground economy in a country will be bigger when

A)    tax rates are lower.	
B)    drug use is higher.
C)    income levels are low.
D)    government red tape is oppressive.
A

D) government red tape is oppressive.

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4
Q

4) The three factors that contribute to changes in labor costs include

A)    compensation, productivity, exchange rates.	
B)    education, inflation, recession.
C)    exchange rates, agriculture, political policy.
D)    poverty rates, birthrates, death rates.
A

A) compensation, productivity, exchange rates.

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5
Q

5) A large international debt may cause a government to impose wage controls, which result in

A)    limiting consumer purchasing power.	
B)    increasing government spending.
C)    eliminating price controls.
D)    expanding to a larger market.
A

A) limiting consumer purchasing power.

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6
Q

6) Historically, gold has been used as a way for people to store value because of its

A)    purity and scarcity.	
B)    high transportation and security costs.
C)    lack of interest-earning ability.
D)    accessibility and convenience.
A

A) purity and scarcity.

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7
Q

7) The fixed exchange rates set up at Bretton Woods were based on gold and

A)    the Japanese yen.	
B)    the British pound.
C)    the Mexican peso.
D)    the U.S. dollar.
A

D) the U.S. dollar.

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8
Q

8) The Bretton Woods system was in place from

A)    after World War II to 1971.	
B)    between World War I and World War II.
C)    from 1952 to 1990.
D)    World War II to the present.
A

A) after World War II to 1971.

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9
Q

9) In a managed float currency arrangement, the currency fluctuates while

A)    the country’s monetary authority intervenes on the currency market without making its goals and targets public.	
B)    the currency uses the currencies of trading partners as ballast.
C)    a group of nations decide to manage their currencies jointly and publicly, relying on the market.
D)    gold is used to stabilize the currency values, hence, managed.
A

A) the country’s monetary authority intervenes on the currency market without making its goals and targets public.

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10
Q

10) Jason wants to lock in today’s exchange rate because he is worried rates might skyrocket in the next few months. He wants to lock in this rate for the shipments he has due in the next 60 days. What type of rate is Jason interested in?

A)    forward rate	
B)    spot rate
C)    ask rate
D)    bid rate
A

A) forward rate

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11
Q

A problem in which a national currency that is also a reserve currency will eventually run a deficit, leading to lack of confidence in the reserve currency and a financial crisis

A

Triffin paradox

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12
Q

An international reserve asset established by the IMF; the unit of account for the IMF and other international organizations.

A

Special drawing rights (SDR)

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13
Q

Institution for central bankers; operates to build cooperation in order to foster monetary and financial stability

A

Bank for International Settlement

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14
Q

A currency used as a vehicle for international trade or investment

A

Vehicle currency

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15
Q

A currency used by a country to intervene in the foreign currency exchange markets

A

Intervention currency

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16
Q

In FX, using the dollar as the base currency, a currency that is quoted as dollars per unit of currency instead of in units of currency per dollar

A

Reciprocal currency

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17
Q

The exchange rate between two currencies for delivery within two business days

A

Spot rate

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18
Q

Trading market for currency contracts deliverable 30, 60, 90, or 180 days in the future

A

Forward currency market

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19
Q

The exchange rate between two currencies for delivery in the future, usually 30, 60, 90, or 180 days

A

Forward rate

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20
Q

Policies that address the collecting and spending of money by the government

A

Fiscal policies

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21
Q

Government policies that control the amount of money in circulation and its growth rate

A

monetary policies

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22
Q

Concept that in an efficient market, like products will have like prices

A

Law of one price

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23
Q

The relationship between real and nominal interest rates: The real interest rate will be the nominal interest rate minus the expected rate of inflation

A

Fisher effect

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24
Q

The process of buying and selling instantaneously to make profit with no risk

A

Arbitrage

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25
Q

Concept that the interest rate differentials for any two currencies will reflect the expected change in their exchange rates

A

International Fisher effect

26
Q

The amount of adjustment that must be made in the exchange rates for two currencies in order for them to have equivalent purchasing power

A

Purchasing power parity (PPP)

27
Q

Assumption that current market prices fully reflect all available relevant information

A

Efficient market approach

28
Q

Assumption that the unpredictability of factors suggests that the best predictor of tomorrow’s prices is today’s prices

A

Random walk hypothesis

29
Q

Exchange rate prediction based on econometric models that attempt to capture the variables and their correct relationships

A

Fundamental approach

30
Q

An approach that analyzes data for trends and then projects these trends forward

A

Technical analysis

31
Q

Governments can control currency exchange of their currency and other currencies within their borders

A

Currency Exchange Controls

32
Q

Convertible currencies can be exchanged for other currencies without restrictions.
When a currency is nonconvertible, its value is arbitrarily fixed, typically at a rate higher than its value in the free market, and the government imposes exchange controls to limit or prohibit the legal use of its currency in international transactions.
The government also requires that all purchases or sales of other currencies be made through a government agency.

A

Convertible and Nonconvertible Currencies

33
Q

Effective tax management can yield a competitive advantage
Management techniques involve profit shifting (often through transfer pricing) and inversion (moving to a lower-tax environment)

A

Taxation

34
Q

Income—direct tax on corp. and individual income
Value-added—really a sales tax, and collected at each step of value added, then credited back on earlier payments
Withholding tax-indirect tax on passive income

A

Types of Taxes

35
Q

Current account
tracks tangible goods - trade balance, services
Intangibles - unilateral transfers (gifts, aid, migrant worker earnings)
Capital account
tracks financial assets and liabilities, direct investment, portfolio investment, short-term capital flows (credit when resident sells stock to nonresident)
Official reserves
gold imports and exports
Current account deficit may mean economic problems (inflation, low productivity, inadequate savings) OR that demand into the country (Treasury bills, investment property) exceeds outward flows (as in U.S.)
To give meaning to a deficit, you need to look at total picture.

A

Balance of Payments Accounts

36
Q

Includes all the uncontrollable forces originating outside the home country that surround and influence the firm.
The interaction between domestic and foreign environmental forces or between sets of foreign environmental forces.

A

Foreign Environment

37
Q

GNI per captia
High-income economies: GNI per capita of $12,056 or more.
Middle-income economies: GNI per capita of over $995 but less than $12,056, which can be further divided into:
Upper-middle-income economies: GNI per capita of $3,896 up to $12,055.
Lower-middle-income economies: GNI per capita over $996 up to $3,895.
Low-income economies: GNI per capita of $995 or less.

A

Levels of Economic Development

38
Q

A measure of the total value of all income generated by the residents of a nation, including both domestic production of goods and services and income generated from abroad, mainly through dividends and interest payments, minus similar payments made to other countries.

A

GNI

39
Q

A classification for the world’s lower-income nations, which have less technically developed infrastructures and lower living standard

A

Developing economies

40
Q

A classification for high-income industrialized nations, which have high living standards and the most technically developed infrastructure

A

Developed economies

41
Q

Economies with per-capita incomes in the low to middle range that are in a transition toward developed status

A

Emerging market economies

42
Q

Ownership of goods.
Consumption of key materials.

A

Personal Consumption

43
Q

after-tax personal income.

A

Disposable income

44
Q

A measure of an economy’s size based on the market value of goods and services produced within a nation in a year

A

Gross domestic product (GDP)

45
Q

A means of adjusting the exchange rates for two currencies so the currencies have equivalent purchasing power

A

Purchasing power parity (PPP)

46
Q

The arithmetic average of the current exchange rate and the exchange rates in the two preceding years, adjusted by the ratio of domestic inflation to the combined inflation rates of the euro zone, Japan, the United Kingdom, and the United States

A

Atlas conversion factor

47
Q

The part of a nation’s income that, because of un-reporting or underreporting, is not measured by official statistics
includes undeclared production of legal and illegal goods and services, their corresponding activities

A

Underground economy

48
Q

The amount of income left after paying taxes and making essential purchases
Added remittance coming in going out.

A

Discretionary income

49
Q

After-tax personal income

A

Disposable income

50
Q

Knowledge of _____ ______ is enhanced by measures such as the ownership of goods (e.g., automobiles, cell phones) and the consumption of key materials (e.g., energy)

A

personal consumption

51
Q

Low or slowly rising unit labor costs may indicate opportunity to lower production costs and may indicate locations of new competition in world markets.
Changes in wage rates may cause companies to change their international sources of supply.

A

Unit labor costs

52
Q

gains in productivity may reduce the impact of higher compensation.

A

Productivity

53
Q

A measure of the number of inhabitants per area unit (inhabitants per square kilometer or square mile)

A

Population density

54
Q

A measure of how the inhabitants are distributed over a nation’s area

A

Population distribution

55
Q

The movement of a nation’s population from rural areas to cities

A

Rural-to-urban shift

56
Q

Five Currencies in SDR

A

Dollar, Yen, Deutchmark, Pound, Franc

57
Q

ECU

A

SDR without Yen and Dollar. Can provide Traveler’s check

58
Q

Convergence Ratio Criteria For Euro

A

Debt Ratio
Inflation Ratio
Interest Rate

59
Q

How many countries are in Euro

A

18

60
Q

amount of income left after paying taxes and making essential purchases.

A

Discretionary income

IMS (3 decks)

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