A nation's country-risk premium can be divided into two major parts:
a. Market risk premium and foreign exchange risk premium.
b. Market risk premium and credit risk premium.
c. Market risk and expected inflation premium
d. Market risk premium and political/social risk premium.
Question 2 - Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and real GDP in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and real GDP falls.
b. The real risk-free interest rate falls and real GDP rises.
c. The real risk-free interest rate rises and real GDP remains the same.
d. The real risk-free interest rate and real GDP remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 3 - Simon's man from mars would see primarily
a. the flow of international trade
b. capital hiring labor
c. markets failing
d. the flow of transactions within enterprises
e. all of the above
Question 4 - Credit risk reflects:
a. A company's expected performance, level of solvency, and potential inability to service its debts.
b. A company's ability to get credit for its performance in the stock market, which means having its share price rise at the same rate or faster than profitability.
c. The variability of cash flows for the national government.
d. All of the above.
Question 5 - Assume that foreign capital flows into a nation rise due to expected increases in stock market appreciation. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls and GDP Price Index rises.
b. The real risk-free interest rate falls and GDP Price Index falls.
c. The real risk-free interest rate rises and GDP Price Index falls.
d. The real risk-free interest rate and GDP Price Index remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 6 - Institutions are:
a. the rules of the game
b. how resources are allocated
c. illustrations of the laws of scarcity
d. organizations that operate on a non-profit basis
e. none of the above
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