Global Corporate Finance MULTIPLE CHOICE

b 1. Over time, the primary main reason for U.S. multinationals to produce outside the U.S. has been to?
a) lower costs
b) respond more quickly to the marketplace
c) avoid trade barriers
d) gain tax benefits a 2. The main intent of the multinational organization is to? a.) maximize shareholder wealth b) maximize world production c) minimize debt d) minimize the cost of doing business globally

d 3. Exchange rates depend primarily upon which of the following?
a) monetary systems
b) political systems
c) trade deficits
d) inflation rates between nations

b 4. Replacing the local foreign currency with the dollar is>
a) Seignorage
b) Dollarization
c) Depreciation d) Appreciation

d 5. Adjusting national economic policies to maintain foreign local exchange rates within a specific margin around agreed-upon, fixed central exchange rates is called
a) managed float
b) ‘beggar-thy-neighbor” devaluation
c) dirty float
d) target-zone agreement

b 6. Nonconvertible paper money backed only by full faith of the government is called?
a) Specie
b) Fiat money
c) Seignorage
d) Par value

b 7. Theoretically, relative purchasing power parity states, between nations, the a) inflation rates are unrelated b) exchange rate differential reflects the inflation rate differential c) inflation rate is smaller in weaker currencies d) the interest rate is greater than the inflation rate during depreciations

c 8. The _________ rate is made up of a real required rate of return and an inflation premium with respect to the Fisher effect. a) nominal exchange b) real exchange c) nominal interest d) adjusted dividend