Question

1. Non-US firms may issue ________, which are certificates representing bundles of stock when they sell their stocks in the U.S. stock market

a. banker's acceptance
b. ADR'S
c. BW's
d. Euro Bonds

2. A higher home inflation rate relative to other countries would ________ the home country's current account balance, as imports _______ and exports ______.

a. increase, increase, decrease
b. decrease, Increase, decrease
c. increase, decrease, increase
d. decrease, decrease, increase

3. Firms typically prefer to invest in countries where the local currency is expected to strengthen against their own

True or False

Answer 1

1. Ans - b) ADRs

Non-US firms may issue ADRS,  which are certificates representing bundles of stock when they sell their stocks in the U.S. stock market

2. Ans - b) decrease, Increase, decrease

Explanation:

As higher inflation causes more imports because now foreign goods are relatively cheap and domestic good become relatively expensive so export falls causes the current account balance to decrease.

3. Ans - TRue

Firms typically prefer to invest in countries where the local currency is expected to strengthen against their own to earn the profit of increasing value of that currency.