Classical

Advanced Questions - Section 2

1:  

International joint ventures can lead to welfare losses when the newly established firm

A.

adds to the pre-existing productive capacity

B.

enters markets neither parent could have entered individually

C.

yields cost reductions unavailable to parent firms

D.

gives rise to increased amounts of market power

 
 

Option: D

Explanation :


2:  

Credit (+) items in the balance of payments correspond to anything that

A.

involves receipts from foreigners

B.

involves payments to foreigners

C.

increases the domestic money supply

D.

decreases the demand for foreign exchange

 
 

Option: A

Explanation :


3:  

Suppose that a Swiss television set that costs 400 francs in Switzerland costs $200 in the United States. The exchange rate between the franc and the dollar is

A.

2 francs per dollar

B.

1 franc per dollar

C.

$2 per franc

D.

$3 per franc

 
 

Option: A

Explanation :


4:  

The franc is said to be selling at a ____ if the spot dollar price is $0.48 and the ninemonth forward rate is $0.42.

A.

forward discount

B.

forward premium

C.

forward spread

D.

none of the above

 
 

Option: A

Explanation :


5:  

The exchange rate system that best characterizes the present international monetary arrangement used by industrialized countries is

A.

freely fluctuating exchange rates

B.

adjustable pegged exchange rates

C.

managed floating exchange rates

D.

pegged or fixed exchange rates

 
 

Option: C

Explanation :




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