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    Exam 1 - Salvo

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    Sample Rooms Malta __ Accommodation Rental Agreement (3)Sample Rooms Malta __ Accommodation Rental Agreement (3)

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    Exam 1 - Salvo

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    Sample Rooms Malta __ Accommodation Rental Agreement (3)Sample Rooms Malta __ Accommodation Rental Agreement (3)

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    Exam 1_Salvo

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    Sample Rooms Malta __ Accommodation Rental Agreement (3)Sample Rooms Malta __ Accommodation Rental Agreement (3)

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    3 views2 pages

    Exam 1 - Salvo

    Uploaded by

    cemede4349
    Sample Rooms Malta __ Accommodation Rental Agreement (3)Sample Rooms Malta __ Accommodation Rental Agreement (3)

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    International Economics

    Mock Exam
    PART 1: MULTIPLE CHOICE QUESTIONS
    (Up to 15 points; correct answer: 1.5 points; wrong answer: 0 points)

    Q1. Whenever a nation's currency is expected to depreciate because of various market conditions, the
    following situation exists regarding its forward rate for another currency:
    A) there is a forward premium from the spot rate B) there is no predictable relationship between the
    by the rate of depreciation spot and forward rates
    C) there is no difference between the spot and D) there is a forward discount from the spot rate
    forward rates by the rate of depreciation

    Q2. Assume a nation's external wealth is negative. Also assume all liabilities and assets are denominated
    in a foreign currency. How will its wealth change when its currency appreciates in world markets?
    A) Its external wealth will rise B) There will be no change in the value of its wealth
    C) It depends on the currency in which it has its D) Its external wealth will fall
    assets and liabilities

    Q3. Assume that the U.S. interest rate is 5%, the European interest rate is 2%, and the future expected
    exchange rate in one year is $1.224. If the spot rate is $1.24, then the expected dollar return on euro
    deposits is:
    A) 4% B) 0.71%
    C) 7.1% D) 0.129%

    Q4. If the spot exchange rate is undervalued, the foreign rate of return is:
    A) equal to the domestic rate of return B) greater than the domestic rate of return
    C) less than the domestic rate of return D) diverging from the domestic rate of return

    Q5. Suppose that a loan made in euros has experienced a capital gain. This indicates that the:
    A) dollar appreciated B) dollar depreciated
    C) euro depreciated D) dollar experienced a capital loss

    Q6. …
    Q7. …
    Q8. …
    Q9. …
    Q10. …
    PART 2: EXERCISES
    (Up to 12 points; correct answer: 4 points per each)

    Exercise 1.
    Show how each of the following would affect the U.S. balance of payments. Include a description of the
    debit and credit items, and in each case identify which specific account is affected (e.g., imports of goods
    and services, IM; exports of assets, EXA; and so on).
    a) A California computer manufacturer purchases a $50 hard disk from a Malaysian company, paying the
    funds from a bank account in Malaysia.
    b) A U.S. tourist to Japan sells his iPod to a local resident for yen worth $100.
    c) The U.S. central bank purchases $500 million worth of U.S. Treasury bonds from a British financial
    firm and sells pound sterling foreign reserves.
    d) A U.S. owner of Sony shares receives $10,000 in dividend payments, which are paid into a Tokyo bank.
    e) The central bank of China purchases $1 million of export earnings from a firm that has sold $1 million
    of toys to the United States, and the central bank holds these dollars as reserves.
    f) The U.S. government forgives a $50 million debt owed by a developing country.

    Exercise 2. …
    Exercise 3. …

    PART 3: OPEN QUESTION


    (Up to 3 points)

    Several countries that have experienced hyperinflation adopt dollarization as a way to control domestic
    inflation. For example, Ecuador has used the U.S. dollar as its domestic currency since 2000. What does
    dollarization imply about the exchange rate between a country and another? Why might countries
    experiencing hyperinflation adopt dollarization? Why might they do this rather than just fixing their
    exchange rate?

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