Which of the following is NOT a benefit of international trade?
A) It increases overall output.
B) It results in a transmission of ideas.
C) It promotes self-sufficiency.
D) It results in the transmission of new processes.
Answer: C
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Suppose a U.S. firm buys a one-year U.K. bond for 6,000 British pounds when 1 British pound is worth $1.50 on the foreign exchange market. What is the firm's approximate rate of return on the bond if the interest rate on the bond is 15 percent and the exchange rate is 1 British pound is worth $1.93 at maturity?
a. 11 percent b. 15 percent c. 25 percent d. 33 percent e. 48 percent
Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit. What is most likely to happen?
a. a gradual increase in the value of its currency b. a gradual decrease in the value of its currency c. a "run" on its currency and a sudden appreciation d. a "run" on its currency and a sudden devaluation