1. Of the following situations, the one that does NOT usually cause an increased interest rate is
A. Political uncertainty
B. When people are saving more and borrowing less.
C. When inflation is increasing
D. When people are saving less and borrowing more
2. Interest rates are affected by
A. Money supply and demand, risk, inflation
B. Money supply and demand, balance of payments, unfavorable payments.
C. Money supply only
D. Unfavorable payments, risk, and political stability.
3. An exchange rate is the amount of money one currency can be traded for one unit of another currency.
A. True
B. False
4. The exchange rate for a nation's currency will usually remain constant or increase if
A. The supply of currency increases, but the demand does not.
B. The balance of payments is favorable.
C. The balance of payments is unfavorable.
D. Inflation increases
5. The exchange rate for a stable country
A. Remains the same unless there is political change.
B. Changes based on supply and demand.
C. Is based on the U.S. dollar
D. Is based on gold
6. While in India you purchased a hat for $15 U.S.. How many rupees would you have to pay if each rupee was .032 U.S. dollars?
A. 48 rupees
B. 213.33
C. 450.48
D. 468.75
7. Methods of short term financing include
A. Trade credit and business loans
B. Accounts payable, accounts receivable, and bonds.
C. Bonds
D. A bill of exchange
8. The primary purpose of the World Bank is to maintain an orderly system of world trade and exchange rates.
A. True
B. false
9. A monetary unit that is freely and easily converted into other currencies is
A. A hard currency
B. A soft currency
C. An exchange control
D. A trade credit
10. A country's currency usually declines in value if the country's debt increases significantly.
A. True
B. False
11. Salt was used as money once but would not work well today because
A. It would be difficult to persuade someone to accept salt as money
B. Salt is not durable
C. Salt is not scarce
D. All of these
12. All of the following are examples of a capital project EXCEPT
A. Installing a new computer network system
B. Buying a six-month supply of packaging materials to take advantage of a limited discount.
C. Purchasing ships to transport goods overseas.
D. Purchasing a supplier company.
13. If you purchased a camera in Britain for 100 pounds, what would be the price in U.S. dollars if one pound is worth $1.40?
A. $71
B. $100
C. $140
D. $1,400
14. An example of an exchange control is when the government limits the amount of money a tourist may take out of the country.
A. True
B. False
15. When a country has favorable trade balances, its currency is usually stable or rising.
A. True
B. False
11. should be D, I think
Here's the answers, I made a 100%
1. D
2. A
3. A
4. B
5. B
6. D
7. A
8. B
9. A
10. A
11. D
12. B
13. C
14. A
15. A
1. B. When people are saving more and borrowing less.
2. A. Money supply and demand, risk, inflation
3. A. True
4. B. The balance of payments is favorable.
5. B. Changes based on supply and demand.
6. C. 450.48
7. A. Trade credit and business loans
8. B. false
9. A. A hard currency
10. A. True
11. D. All of these
12. B. Buying a six-month supply of packaging materials to take advantage of a limited discount.
13. C. $140
14. A. True
15. A. True
1. The correct answer is D. When people are saving less and borrowing more. To determine this, we need to understand the relationship between savings, borrowing, and interest rates. When people save more and borrow less, there is an increase in the supply of savings in the economy. This increase in supply pushes down interest rates as there is more money available to lend. On the other hand, when people save less and borrow more, there is a decrease in the supply of savings, which can lead to an increase in interest rates. Therefore, when people save less and borrow more, it is more likely to cause an increased interest rate.
2. The correct answer is A. Money supply and demand, risk, inflation. Interest rates are influenced by various factors, including the supply and demand for money, which can affect borrowing costs. Risk also plays a role in interest rates, as lenders will charge higher rates to compensate for higher risks. Inflation affects interest rates as well since lenders will want to be compensated for the erosion of purchasing power caused by inflation.
3. The answer is A. True. An exchange rate is the value of one currency compared to another. It represents the rate at which one currency can be exchanged for another.
4. The correct answer is B. The balance of payments is favorable. The exchange rate for a nation's currency is influenced by various factors, including the balance of payments. If a country has a favorable balance of payments, which means it is exporting more than importing, there will be greater demand for its currency, leading to a higher exchange rate. Conversely, an unfavorable balance of payments, where a country is importing more than exporting, can put downward pressure on the exchange rate.
5. The correct answer is B. Changes based on supply and demand. The exchange rate for a stable country is determined by supply and demand factors in the foreign exchange market. If there is higher demand for a currency, its exchange rate will strengthen. Conversely, if there is lower demand, the exchange rate will weaken.
6. To calculate the number of rupees, we need to divide the price in US dollars by the exchange rate:
$15 / 0.032 = 468.75
Therefore, the answer is D. 468.75 rupees.
7. The correct answer is A. Trade credit and business loans. Short-term financing methods include various options such as trade credit, where suppliers extend credit terms to the buyer, and business loans, where a company borrows funds from a financial institution to meet its short-term financing needs.
8. The answer is B. False. The primary purpose of the World Bank is to provide financial and technical assistance to developing countries for development projects such as infrastructure, education, and healthcare. It does not directly maintain an orderly system of world trade and exchange rates. That role is typically fulfilled by organizations like the International Monetary Fund (IMF).
9. The correct answer is A. A hard currency. A hard currency is a monetary unit that is freely and easily convertible into other currencies. It is usually stable and widely accepted in international transactions.
10. The answer is A. True. When a country's debt increases significantly, it can raise concerns about the country's ability to repay its debts. This can lead to a decrease in investor confidence and a decline in the value of the country's currency.
11. The correct answer is D. All of these. Salt was used as a form of money in some ancient civilizations. However, it would not work well today because it would be difficult to persuade someone to accept it as money, it is not durable and can easily spoil, and it is not scarce as it can be easily obtained.
12. The correct answer is B. Buying a six-month supply of packaging materials to take advantage of a limited discount. A capital project refers to investments in long-term assets that are expected to generate future income or benefits for a business. Buying packaging materials to take advantage of a discount is a short-term operational decision, not a capital project. The other options mentioned, such as installing a new computer network system, purchasing ships, or acquiring a supplier company, involve long-term investments and are considered capital projects.
13. To calculate the price in U.S. dollars, we need to multiply the price in pounds by the exchange rate:
100 pounds * $1.40/pound = $140
Therefore, the answer is C. $140.
14. The answer is A. True. Exchange controls refer to government-imposed restrictions on the movement of capital or currencies across national borders. One example of exchange controls is when the government limits the amount of money a tourist can take out of a country.
15. The answer is A. True. When a country has favorable trade balances, it means it is exporting more than it is importing, leading to a higher demand for its currency. This increased demand for the currency can result in a stable or rising value of the currency in the foreign exchange market.