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Question
Countries that joined the Bretton Woods system were on a gold exchange system.
True False

. Under Bretton Woods the U.S. dollar was not a reserve currency.
True False

. The Bretton Woods system reduced the demand for U.S. dollars.
True False

. Since corporations act as tax collectors rather than bear the ultimate tax burden, it is seldom in their best interest to minimize taxes.
True False

. In almost every country they are used, value-added taxes operate as sales taxes.
True False

. The relationship known as the Fisher effect tells us that the rate of inflation in a country has relatively little impact on the real cost of borrowing money.
True False

. Fiscal policies control the amount of money in circulation, whether or not it is growing and, if so, at what rate.
True False

. Monetary policies address the collecting and spending of money by governments.
True False

. One result of higher inflation is higher interest rates.
True False

. Goods produced in a country with a high inflation rate tend to become more difficult to sell abroad.
True False

. The International Fisher Effect suggests that interest rate differences suggest exchange rate differences.
True False

. U.S. businesses do not need to understand tax law in the countries in which they operate because accounting firms have globalized.
True False

. Purchasing Power Parity is measured by the Consumer Price Index (CPI).
True False

. Inflation can be controlled through monetary and fiscal policy.
True False

. OECD measures inflation using the GDP deflator.
True False

. An intervention currency is part of a country’s reserve that it uses to affect the foreign currency exchange market value of its own currency.
True False

. A vehicle currency is one used when a company or person fears that the currency of its home country is going to lose value.
True False

. When you see that it costs 1.77 Swiss francs to buy one US dollar but only .70 of a British pound to buy that same dollar, it is clear that the British pound is a stronger currency than the Swiss franc.
True False

. Fluctuating currency exchange rates create risks for international businesses different from those borne by domestic businesses.
True False

. Currency exchange controls differ greatly from country to country.
True False

. Purchasing Power Parity mirrors the different price levels of two markets mediated by their exchange rates.
True False

. BIS operates as the central bank for central bankers.
True False

. Controllable financial risks include foreign currency risks, national BOP, taxation, tariffs, national monetary and fiscal policies, inflation, and national business accounting rules.
True False

. The Euro is the most used vehicle and intervention currency.
True False

. A foreign exchange quotation is the price of one currency expressed in the terms of another.
True False

. If one Japanese yen costs less than one U.S. cent, that means items automatically cost less in Japan than they do in the U.S.
True False

. A currency used to pay for imports or investments is called an intervention currency.
True False

. The belief that the United States is less likely than other counties to be subject to a military coup makes the U.S. dollar a spot currency.
True False

. When you find an exchange quotation, which indicates: Swiss (franc) US$ equivalent rate .6810, that means one Swiss franc costs US$.6810.
True False

. The spot rate is the exchange rate between two currencies for delivery in 10 days.
True False

. The forward rate is the exchange rate between two currencies for their immediate trade for delivery within two days.
True False

. McDonald’s has been successful in international expansion despite the weakening of the dollar largely due to the Big Mac Index.
True False

. Currency values fluctuate only when purchasing power parity suggests that they should.
True False

. Forward rate is the exchange rate between two currencies for delivery in the future.
True False

. In a foreign bank or currency exchange agency, the bid price is the price the office is asking for the currency.
True False

. Currency exchange controls almost invariably cause currency black markets to evolve.
True False

. The currency controls of many of the world’s developing countries have been dropped to encourage trade and foreign investment.
True False

. Practical reasons for the central position of the US$ in the world are its several uses including as a central reserve, intervention, and vehicle currency.
True False

. A private sector bank charging a commission for exchanging one currency to another currency is an example of a currency exchange control.
True False

. The actual currency exchange trades are usually Over the Counter (OTC), meaning that there is no trading floor, an electronic platform is used.
True False

. When a six months forward contract for a currency is trading lower than its spot price, the forward contract is said to be trading at a premium.
True False

. The bid rate is usually lower than the ask.
True False

. As a generality, only the relatively rich industrialized countries have currency exchange controls.
True False

. Inflation rates are of little interest to international business people.
True False

. The simplicity of the gold standard was a large part of its appeal.
True False

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