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International Finance Problems

1. The _____ was created to provide a forum for regular discussion of trade matters, and to implement a well-defined process for settling trade disputes that might arise among countries.

a. World Trade Organization

b. International Monetary Fund

c. General Agreement on Tariff and Trade

d. World Bank


2. ______ measures the total value of all goods and services produced by a country during a year and is a measure of the extent of economic activity in a country

a. Gross domestic product

b. Net national product

c. National income

d. Gross national product

e. Balance of Finance

3. The CPI (with 2000 as the base year) for Country A was reported at 112 in 2005 and 118 in 2006. Calculate the approximate annual inflation rate for this country.

a. 5.36

b. -5.36

c. 4.5

d. -5.13

e. 4.58

4. The international investment position of a country:

a. corresponds to the total national debt of a nation.

b. corresponds to the sum of a country’s trade deficits and surpluses over time.

c. equals the total value of foreign assets held by domestic residents.

d. equals the total value of domestic assets held by foreigners.

e. corresponds to the sum of the nation’s government budget deficits over time.

5. Which of the following rules are established by a country under a gold standard?

a. A country fixes it currency value to dollars.

b. A country establishes a currency board.

c. A country fixes its currency value to a weight of gold

d. A country fixes its currency value to a composite currency.

e. A country fixes its currency value to euros.

6. Suppose in 1915, Mexico fixed its currency at 280pesos per ounce of gold while Canada fixed its currency to C$25 per ounce of gold. As a result of the gold-currency convertibility in both countries, the peso/C$ exchange rate will be:

a. 8.90pesos/C$.

b. 0.75pesos/C$.

c. 12.20 pesos/C$.

d. 11.20pesos/C$.

e. 10.02pesos/C$.

7. The core services / activities of the International Chamber of Commerce are:

a) practical services to business;

b) working against commercial crime;

c) being an advocate for international business;

d) spreading business expertise;

e) All of the above

8. The development of increased trade imbalances and country indebtedness, together with subsequent competitive currency devaluations aiming to strengthen a country’s own exports have resulted in:

a. Increased stock prices in Japan

b. The implementation of the gold standard being in most countries of the world

c. More volatility in currency exchange rates

d. All of the above

e. None of the above

9. The spot rate is the rate at which a foreign exchange trade can be transacted:

a. Immediately

b. After exactly 30 days

c. At any time, including the weekends

d. None of the above

10. How does a company hedge against currency risks?

a. Currency options

b. Payments brought forward

c. Forward currency contracts

d. All of the above

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