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40 Cards in this Set
- Front
- Back
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the commonly accepted goal of the MNC is to...
a) maximize short term earnings b) maximize shareholders wealth c) minimize risk d) A and C e) maximize international sales |
b) maximize shareholders wealth
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With regard to corporate goals, an MNC is mostly concerned with maximizing _______ and purely domestic firms is mostly concerned with maximizing______.
a) shareholders wealth, short term earnings b) shareholders wealth, shareholders wealth c) short term earnings, sales volume d) short term earnings, shareholders wealth |
b) shareholders wealth, shareholders wealth
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for the MNC, agency costs are typically:
a) non existent b) larger than agency cost of a small purely domestic firm c) smaller than agency cost of a small purely domestic firm d) the same as a agency cost of a small purely domestic firm |
b) larger than agency cost of a small purely domestic firm
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which of the following theories identifies specialization as a reason for international business?
a) theory of comparative advantage b) imperfect market theory c) product cycle theory d) none |
a) theory of comparative advantage
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due to risks involved in international business, firms should:
a) only consider international business in major countries b) maintain international business to no more than 20% of total business c) maintain international business to no more than 30% of total business d) none |
d) none
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the term privatization is typically used to describe:
a) firm that are purchased by their managers b) firms that are purchased by the govt c) firms that are bought out by other firms d) govt operations that are purchased by corporations and other investors |
d) govt operations that are purchased by corporations and other investors
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which of the following is not mentioned in the text as an additional risk resulting from international business?
a) exchange rate fluctuations b) political risk c) interest rate risk d) exposure to foreign economies |
c) interest rate risk
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recently, the US experienced an annual balance of trade representing a ______.
a) large surplus (exceeding $100th billion) b) small surplus c) level of zero d) deficit |
d) deficit
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a high home inflation rate relative to other countries would ___ the home country's current account balance, other things equal. A high growth in the home income level relative to other countries would ____ the home country's current account balance, other things equal.
a) increase, increase b) increase, decrease c) decrease, decrease d) decrease, increase |
c) decrease, decrease
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if a country's govt imposes a tariff on imported goods, that country's current account balance will likely ____
a) decrease b) increase c) remain unaffected d) either A or C are possible |
increase
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______ purchases more US exports than any other country
a) Japan b) United kingdom c) Mexico d) Canada |
d) Canada
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An increase in the correct account deficit will place ____ pressure on the home currency value, other things equal
a) upward b) downward c) no d) upward or downward (depending on the size of the deficit) |
b) downward
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Direct foreign investment into the US represents a _______.
a) capital inflow b) trade inflow c) capital outflow d) trade outflow |
a) capital inflow
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a balance of trade surplus indicates an excess of merchandize imports over merchandize exports.
True/ False |
false
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a weakening of the US dollar with respect to the British pound would likely reduce the US exports to British and increase US imports from Britain
True/ False |
false
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the world bank frequently enters I to cofinancing agreements. under these agreements, financing is provided by the World Bank and/or official said agencies, exports credit agencies,or commercial banks.
True/ False |
True
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the balance of payments is a measurement of all transactions between domestic and foreign residents over a specified period of time
True/ False |
True
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c) reduce
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which of the following would likely have the least direct influence on a country's current account?
a) inflation b) national income c) exchange rates d) tariff e) a tax on income earned from foreign stock |
e) a tax on income earned from foreign stock
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the j-curve effect describe?
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the short run tendency for a country's balance of trade to deteriorate even while it's currency is depreciating
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the direct foreign investment positions by US firms have generally ____ over time; the direct foreign investment positions in the US by non US firms generally ______ over time
a) increase, increase b) increase, decrease c) decrease, decrease d) decrease, increase |
a) increase, increase
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"Dumping" is used in the text to represent ?
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exporting of goods at prices below cost
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what is the bid ask percentage spread?
bank's bid rate on Swiss France is $.45 and its ask rate is $.47 a) 4.44% b) 4.26% c) 4.03% d) 4.17% |
b) 4.26%
= (.47-.45)/.47= 4.26 |
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the forward rate is the exchange rate used for immediate exchange of currencies.
True/ False |
False
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the ask quote is the price for which a bank offers to sell a currency
True/ False |
True
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the eurocredit market primarily concentrates on what?
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medium term lending
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who are the main participants in the eurocurrency market?
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large corporations
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a syndicated eurocredit loan is
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represents a loan by a group of eurobanks to a borrower
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from 1944 to 1971,the exchange rate between any two currencies was typically what?
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fixed within narrow boundaries
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eurocredit loans are?
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loans of one year or longer extended by eurobanks
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under the gold standard, each currency was convertible into gold at a specified rate, and the exchange rate between two currencies was determined by their relative convertibility rate per once of gold
True/ False |
True
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An investor engaging in a transaction whereby he contracts to purchase British pounds one year from now is an example of a spot market transaction
True/ False |
false
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Gold Standard
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exchange rates were dictated by gold standards. each currency was convertible into gold at a specified rate.
ended when WWII began in 1914 |
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Bretton Woods Agreement
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called for fixed exchange rates between currencies.
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Spot Market
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most common type of foreign exchange transaction
the market where transactions occur |
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Spot Market Structure
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Commercial transactions in the spot market are often done electronically and the exchange rate at the time determines the funds necessary for the transaction
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Spot Market Liquidity
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the spot market is described by its liquidity, which reflects the level of trading activity
heavily traded means very liquid |
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Bid/Ask Spread
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(ask rate - bid rate) / ask rate
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Direct 's indirect quotations
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HKD/ USD is indirect
Direct represents the value of a foreign currency in dollars (# of USD per currency) indirect is the # of foreign currency units per USD |
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International Money Market
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local corporations commonly need to borrow short term funds to support their operations
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