According to the text, which currency is expected to experience the most change in the upcoming years?

According to the text, which currency is expected to experience the most change in the upcoming years?

A) yen
B) yuan
C) euro
D) U.S. dollar

Answer: B

Which of the following most accurately describes the economic situation in El Salvador?

Which of the following most accurately describes the economic situation in El Salvador?

A) It is facing significant competition from neighboring countries that are not tied to the dollar.
B) It relies exclusively on the United States as a market for its products.
C) It now has the same exchange rate as other members of CACM.
D) It is putting more resources into industries that have a history of earning profits.

Answer: A

Endaka, the "high yen," caused financial problems for ________.

Endaka, the "high yen," caused financial problems for ________.

A) Japanese foreign-exchange reserves
B) American foreign-exchange reserves
C) Japanese importers
D) Japanese exporters

Answer: D

If the euro continues to remain strong against the U.S. dollar, which of the following strategies would make the most sense for BMW?

If the euro continues to remain strong against the U.S. dollar, which of the following strategies would make the most sense for BMW?

A) It might be advantageous for them to consider exporting from Germany to the U.S. to take advantage of cheaper costs.
B) It might increase its manufacturing capacity in the United States to take advantage of the cheaper dollar.
C) It might consider raising prices in the United States to earn more profits for BMW.
D) It really doesn't make any difference to BMW since consumers will buy the cars no matter what they cost.

Answer: B

Which of the following accurately explains how producers are affected by exchange rate changes?

Which of the following accurately explains how producers are affected by exchange rate changes?

A) To save money, a manufacturer may decide to relocate production to a country with a stronger currency.
B) A manufacturing firm relocating to a country with a weak currency can make a cheap initial investment.
C) Goods manufactured in a country with a weak currency may be relatively expensive in world markets.
D) A manufacturer with high operating expenses would likely relocate production to a country with a currency that is gaining value.

Answer: B

Ray, a marketer at a global firm, monitors the exchange rate of countries in which the firm sells its products. Ray is most likely concerned about changes in ________.

Ray, a marketer at a global firm, monitors the exchange rate of countries in which the firm sells its products. Ray is most likely concerned about changes in ________. 

A) operating expenses
B) exporting policies
C) product demand
D) quality control

Answer: C

Tanya is a manager at a global firm that has operations located in Brazil, India, and Japan. Tanya is in the process of making a fundamental analysis in order to forecast exchange rates in each country. Which of the following is a confidence factor that Tanya should consider in trying to predict exchange rate movements in each country?

Tanya is a manager at a global firm that has operations located in Brazil, India, and Japan. Tanya is in the process of making a fundamental analysis in order to forecast exchange rates in each country. Which of the following is a confidence factor that Tanya should consider in trying to predict exchange rate movements in each country?

A) What are the expectations of the market with respect to the political environment?
B) Have there been significant national events that have appeared in the news lately?
C) At what rates do there appear to be buy and sell orders?
D) What trends do the charts show?

Answer: A

Tanya is a manager at a global firm that has operations located in Brazil, India, and Japan. Tanya is in the process of making a fundamental analysis in order to forecast exchange rates in each country. Which of the following questions is most relevant to Tanya?

Tanya is a manager at a global firm that has operations located in Brazil, India, and Japan. Tanya is in the process of making a fundamental analysis in order to forecast exchange rates in each country. Which of the following questions is most relevant to Tanya?

A) What is the cyclical situation in terms of employment and inflation?
B) Are the government's intervention practices sustainable?
C) What level of credibility does the government have?
D) What is the possibility of a national crisis?

Answer: A

Craig, a manager at a global firm, is studying the cyclical nature of growth and employment as a part of the process to forecast exchange rates. Which factor is Craig most likely monitoring?

Craig, a manager at a global firm, is studying the cyclical nature of growth and employment as a part of the process to forecast exchange rates. Which factor is Craig most likely monitoring?

A) the institutional setting
B) fundamental analyses
C) cultural analyses
D) circumstances

Answer: B

Shelly, a manager at a global firm, is studying the foreign currency intervention practices of Indonesia. Shelly is most likely examining ________ factors.

Shelly, a manager at a global firm, is studying the foreign currency intervention practices of Indonesia. Shelly is most likely examining ________ factors.

A) institutional setting
B) fundamental analysis
C) confidence
D) circumstantial

Answer: A

Many economists have predicted that Hong Kong will change its currency system to the ________.

Many economists have predicted that Hong Kong will change its currency system to the ________.

A) U.S. dollar
B) euro
C) yuan
D) won

Answer: C

In a country with a currency that is not freely floating, the timing of an exchange rate change is often a ________ decision.

In a country with a currency that is not freely floating, the timing of an exchange rate change is often a ________ decision.

A) cultural
B) consensus
C) political
D) market

Answer: C

It is easier to predict the ________ of a change than the ________ of a change in exchange rates.

It is easier to predict the ________ of a change than the ________ of a change in exchange rates.

A) altitude; magnitude
B) depth; length
C) timing; depth
D) direction; magnitude

Answer: D

Forecasters must predict the magnitude, direction, and ________ of an exchange rate change or movement.

Forecasters must predict the magnitude, direction, and ________ of an exchange rate change or movement.

A) length
B) timing
C) altitude
D) depth

Answer: B

Research has shown that past exchange rates are an accurate predictor of future exchange rates ________.

Research has shown that past exchange rates are an accurate predictor of future exchange rates ________.

A) only in the long run
B) only in the very short run
C) only during times of economic crisis
D) only during times of economic calm

Answer: B

A technical forecaster is also known as a ________.

A technical forecaster is also known as a ________.

A) CFO
B) de facto economist
C) chartist
D) monetary administrator

Answer: C

Sarah, a manager at Farley Enterprises, an MNE with operations in Asia, Europe, and North America, is using past trends in exchange rate movements to spot future trends. Which type of forecasting approach is Sarah most likely using?

Sarah, a manager at Farley Enterprises, an MNE with operations in Asia, Europe, and North America, is using past trends in exchange rate movements to spot future trends. Which type of forecasting approach is Sarah most likely using?

A) fundamental
B) technical
C) application
D) economic

Answer: B

Ted, a manager at Global Manufacturing, is analyzing trends in economic variables to predict future exchange rates that might affect the MNE's international operations. Which of the following is Ted most likely doing?

Ted, a manager at Global Manufacturing, is analyzing trends in economic variables to predict future exchange rates that might affect the MNE's international operations. Which of the following is Ted most likely doing? 

A) fundamental forecasting
B) technical forecasting
C) resource forecasting
D) economic forecasting

Answer: A

If the real interest rate is 5%, the rate of inflation in the United States is 6%, and the rate of inflation in the United Kingdom is 3%, which of the following statements would NOT be true?

If the real interest rate is 5%, the rate of inflation in the United States is 6%, and the rate of inflation in the United Kingdom is 3%, which of the following statements would NOT be true?

A) The nominal rate of interest in the U.S. would be greater than the nominal interest rate in the U.K.
B) The difference between the U.K. and U.S. interest rates is a function of the difference between their inflation rates.
C) The nominal rate of interest in the United States and the United Kingdom would be the same because of purchasing power parity.
D) Investors would get a higher return on their money in the United States.

Answer: C

The International Fisher Effect implies that ________.

The International Fisher Effect implies that ________.

A) the country with the higher interest rate should have lower inflation
B) the currency of the country with the lower interest rate will strengthen in the future
C) the currency of the country with the higher interest rate will strengthen in the future
D) interest rates and inflation are not linked at all

Answer: B