Top 250+ Solved International Financial Management MCQ Questions Answer
Q. When a country realizes a deficit on its current account:
a. Its net foreign investment position becomes positive
b. It becomes a net demander of funds from other countries
c. It realizes an excess of imports over exports on goods and services
d. It becomes a net supplier of funds to other countries
Q. Reducing a current account deficit requires a country to:
a. Increase private saving relative to investment
b. Increase private consumption relative to saving
c. Increase private investment relative to consumption
d. Increase private investment relative to saving
Q. Reducing a current account deficit requires a country to:
a. Increase the government’s deficit and increase private investment relative to saving
b. Increase the government’s deficit and decrease private investment relative to saving
c. Decrease the government’s deficit increase private investment relative to saving
d. Decrease the government’s deficit and decrease private investment relative to saving
Q. Reducing a current account surplus requires a country to:
a. Increase the government’s deficit and increase private investment relative to saving
b. Increase the government’s deficit and decrease private investment relative to saving
c. Decrease the government’s deficit and increase private investment relative to saving
d. Decrease the government’s deficit and decrease private investment relative to saving
Q. Concerning a country’s business cycle, rapid growth of production and employment is commonly associated with:
a. Large or growing trade deficits and current account deficits
b. Large or growing trade deficits and current account surpluses
c. Small or shrinking trade deficits and current account deficits
d. Small or shrinking trade deficits and current account surpluses
Q. The burden of a current account deficit would be the least if a nation uses what it borrowsto finance:
a. Unemployment compensation benefits
b. Social Security benefits
c. Expenditures on food and recreation
d. Investment on plant and equipment
Q. On the balance-of-payments statements, merchandise imports are classified in the:
a. Current account
b. Capital account
c. Unilateral transfer account
d. Official settlements account
Q. The balance of international indebtedness is a record of a country’s international:
a. Investment position over a period of time
b. Investment position at a fixed point in time
c. Trade position over a period of time
d. Trade position at a fixed point in time
Q. Which of the following exchange rate policies uses a target exchange rate, but allows the target to change?
a. fixed exchange rate
b. flexible exchange rate
c. crawling peg
d. moving target
Q. A firm that buys foreign exchange in order to take advantage of higher foreign interestrates is
a. speculating.
b. demonstrating purchasing power parity.
c. engaging in interest rate arbitrage.
d. responding to fluctuations in the business cycle.
Q. When an individual or firm in a particular country requests that a bank sell foreign exchange, the bank will probably
a. call a foreign bank and arrange a purchase.
b. call the central bank and arrange a purchase.
c. call another bank customer with foreign exchange holdings.
d. call another domestic bank and arrange a purchase.
Q. In order to protect against foreign exchange risk, firms can use
a. the spot market for foreign exchange.
b. interest rate arbitrage.
c. purchasing power parity.
d. the forward market for foreign exchange.
Q. Covered interest arbitrage involves both
a. the purchase of a foreign asset and a forward contract in the market for foreign exchange.
b. the purchase of a domestic asset and a spot contract in the market for foreign exchange.
c. the sale of a foreign asset and the purchase of a forward contract in the market for foreign exchange.
d. the sale of domestic stocks and the purchase of foreign bonds.
Q. All else equal and under a system of floating exchange rates, if a country enters a periodof exceptionally strong growth,
a. the pressure on its currency is to revalue.
b. the pressure on its currency is to devalue.
c. the pressure on its currency is to depreciate.
d. the pressure on its currency is to appreciate.