Question

Question 57

Slow economic growth and continued unemployment problems are common reasons for central banks to hold currency values down.

Select one:

True

False

Question 58

Which of the following is an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Select one:

a. a greater risk of losing markets to copycat goods producers

b. fewer agency costs

c. an inability to exploit R&D as effectively as if also invested abroad

d. fewer direct advantages from research and development

Question 59

The reference rate of interest in the eurocurrency market is the:

Select one:

a. Federal funds rate

b. Prima rate

c. London Interbank Offered Rate

d. Treasury rate

Question 60

A national securities market is segmented if the required rate of return on securities in that market differs from comparable securities traded in other, unsegmented markets.

Select one:

True

False

Answer 1

Q 57: Answer is True

Central banks hold currencies down because it makes the exporters in their countries more competitive in international markets. They believe this will lead to higher economic growth and more employment opportunities in their country.

Q 58: Answer is b) Fewer agency costs

FDI leads to decentralization, thereby posing greater risk of agency costs as compared to export-model.

Q 59: Answer is c) London Interbank Offer Rate

Also, shortened as LIBOR.

Q 60: Answer is True

If the securities market is not segmented, then arbitrage argument says that the required rate of return on securities in that market will converge with comparable securities traded in other, unsegmented markets.