Term
| The valuation of an MNC should rise when an event causes the expected cash flows from foreign to ___ and when foreign currencies denominating these cash flows are expected to ___. |
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Definition
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Term
| Which of the following theories identifies the non-transferability of resources as a reason for international business? |
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Definition
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Term
| In comparing exporting to direct foreign investment (DFI), an exporting operation will likely incur ___ fixed production costs and ___ transportation costs than DFI |
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Definition
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Term
| Licensing obligates a firm to provide ___, while franchising obligates a firm to provide ___. |
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Definition
| its technology; a specialized sales or service strategy |
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Term
| International trade generally results in ___ exposure to international political risk and ___ exposure to international economic conditions, when compared to other methods of international business |
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Definition
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Term
| Jensen Co. wants to establish a new subsidiary in Mexico that will sell computers to Mexican customers and remit earnings back to the U.S. parent. The value of this project will be favorably affected if the value of the peso ___ while it establishes the new subsidiary and ___ when the subsidiary starts operations |
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Definition
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Term
| If a country's government imposes a tariff on imported goods, that country's current account balance will likely ____ (assuming no retaliation by other governments). |
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Definition
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Term
| If the home currency begins to appreciate against other currencies, this should ____ the current account balance, other things equal (assume that substitutes are readily available in the countries, and that the prices charged by firms remain the same). |
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Definition
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Term
| The "J curve" effect describes |
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Definition
| the short-run tendency for a country's balance of trade to deteriorate even while its currency is depreciating. |
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Term
| A weak home currency may not be a perfect solution to correct a balance of trade deficit because |
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Definition
| foreign companies may reduce the prices of their products to stay competitive. |
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Term
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An increase in U.S. interest rates relative to German interest rates would likely ____ the U.S. demand for euros and ____ the supply of euros for sale |
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Definition
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Term
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Investors from Germany, the United States, and the U.K. frequently invest in each other based on prevailing interest rates. If British interest rates increase, German investors are likely to buy ____ dollar-denominated securities, and the euro is likely to ____ relative to the dollar. |
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Definition
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Term
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Assume that Swiss investors have francs available to invest in securities, and they initially view U.S. and British interest rates as equally attractive. Now assume that U.S. interest rates increase while British interest rates stay the same. This would likely cause |
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Definition
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the Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc |
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Term
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If the U.S. and Japan engage in substantial financial flows but little trade, ____ directly influences their exchange rate the most. If the U.S. and Switzerland engage in much trade but little financial flows, ____ directly influences their exchange rate the most. |
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Definition
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interest rate differentials; inflation and income differentials |
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Term
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If inflation increases substantially in Australia while U.S. inflation remains unchanged, this is expected to place ____ pressure on the value of the Australian dollar with respect to the U.S. dollar |
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Definition
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Term
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Any event that reduces the U.S. demand for Japanese yen should result in a(n) ____ in the value of the Japanese yen with respect to ____, other things being equal. |
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Definition
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Term
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British investors frequently invest in the U.S. or Italy, depending on the prevailing interest rates. If Italian interest rates suddenly rise high above U.S. rates, the investors will ____ the supply of pounds to be exchanged for dollars and thus put ____ pressure on the value of the pound against the U.S. dollar. |
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Definition
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Term
| A weak dollar is normally expected to cause: |
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Definition
| low unemployment and high inflation in the U.S. |
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Term
| To force the value of the British pound to depreciate against the dollar, the Federal Reserve should: |
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Definition
| sell pounds for dollars in the foreign exchange market and the Bank of England should sell pounds for dollars in the foreign exchange market. |
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Term
| Consider two countries that trade with each other, called X and Y. According to the text, inflation in Country X will have a greater impact on inflation in Country Y under the ____ system. Now, consider two other countries that trade with each other, called A and B. Unemployment in Country A will have a greater impact on unemployment in Country B under the ____ system. |
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Definition
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Term
| Under a managed float exchange rate system, the Fed may attempt to stimulate the U.S. economy by ____ the dollar. Such an adjustment in the dollar's value should ____ the U.S. demand for products produced by major foreign countries. |
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Definition
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Term
| Assume Countries A, B, and C produce goods that are substitutes of each other and that these countries engage in trade with each other. Assume that Country A's currency floats against Country B's currency, and that Country C's currency is pegged to B's. If A's currency depreciates against B, then A's exports to C should ____, and A's imports from C should ____. |
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Definition
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Term
| Assume a central bank exchanges its currency for other foreign currencies in the foreign exchange market, but does not adjust for the resulting change in the money supply. This is an example of: |
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Definition
| nonsterilized intervention. |
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Term
| A strong dollar places ____ pressure on inflation, which in turn places ____ pressure on the dollar |
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Definition
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Term
| It has been argued that the exchange rate can be used as a policy tool. Assume that the U.S. government would like to reduce inflation. Which of the following is an appropriate action given this scenario? |
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Definition
Buy dollars with foreign currency |
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Term
| If the Fed desires to strengthen the dollar without affecting the dollar money supply, it should |
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Definition
| exchange foreign currencies for dollars, and buy existing Treasury securities with dollars |
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Term
| Which of the following is an appropriate form of indirect intervention? |
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Definition
| To strengthen the dollar in the long run, the Fed attempts to reduce U.S. inflation. |
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