Under a floating rate system, exchange rates are determined by supply and demand in the foreign exchange market without government intervention.
a. True
b. False
QUESTION 2The largest securities exchange in the United States is the
a. American Stock Exchange
b. Chicago Board of Trade
c. Securities and Exchange Commission
d. New York Stock Exchange
e. Federal Trade Commission
QUESTION 3Which of the following is not a reason why residents of other countries desire to acquire dollars?
a. foreigners need dollars to purchase U.S. goods and services
b. dollars can be used as a safe way of storing value when the foreigner's own currency is unstable
c. dollars are accepted as an international medium of exchange
d. dollars can be used for cash gifts from foreigners to U.S. friends and relatives
e. dollars are the only currency accepted in international transactions
QUESTION 4The market value of ABC Corp, whose securities are publicly traded, can be found by
a. multiplying the price of its stock by the number of shares outstanding
b. dividing the number of shares outstanding by the price of the stock
c. adding the total value of its outstanding stock to the total value of its outstanding bonds
d. subtracting the total value of its outstanding bonds from the total value of its outstanding stock
e. subtracting the total value of its outstanding stock from the total value of its outstanding bonds
QUESTION 5In determining the exchange rate between U.S. dollars and Swiss francs, all of the following are assumed constant along the supply curve for francs except one. Which is not assumed constant?
a. U.S. interest rates
b. Swiss income
c. expected rates of inflation in the United States
d. expected rates of inflation in Switzerland
e. the price of the Swiss franc
QUESTION 6Other things constant, the more profitable a corporation is,
a. the lower the value of its shares on the stock market and the lower the interest rate that would have to be paid on new bond issues
b. the higher the value of its shares on the stock market and the higher the interest rate it would have to pay on new bond issues
c. the higher the value of its shares on the stock market and the lower the interest rate that would have to be paid on new bond issues
d. the lower the value of its shares on the stock market and the higher the interest rate that would have to be paid on new bond issues
e. the lower the interest rate that would have to be paid on new bond issues; the value of its shares on the stock market does not vary
QUESTION 7The supply curve of U.S. dollars is drawn assuming other things constant, such as
a. income in the rest of the world
b. expectations about the rate of inflation in the United States relative to the rest of the world
c. U.S. tastes and preferences for foreign goods
d. the interest rate in the United States relative to the rest of the world
e. tastes and preferences of the rest of the world for U.S. goods and services
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