国际金融双语期末A卷2009 2010 2

国际金融双语期末卷A2009-2010-2浙江财经学院课程期末考试试卷Part I: Multiple choice(1*30=30score)( only one choice for each question)1.Which of the following transactions is recorded in the financial account?A)Ford motor company builds a new plant in ChinaB)A Chinese businessman imports Ford automobiles from the UnitedStates.C)A U.S. tourist spends money on a trip to China.D)The New York Yankees are paid $10 million by the Chinese to play anexhibition game in Beijing, China.2.In the balance of payments, the statistical discrepancy or error term is usedto:A)Ensure that the sum of all debits matches the sum of all credits.B)Ensure that imports equal the value of exports.C)Obtain an accurate account of a balance-of-payments deficit.D)Obtain an accurate account of a balance-of-payments surplus.3.A deficit in the overall balance generally is an indication that:A)The country's monetary authorities were selling foreign currency.B)The country's monetary authorities were buying foreign currency.C)The country's monetary authorities were buying domestic currency.D)The country's monetary authorities were buying imported goods.4. Suppose that a Korean television set that costs 600 won in Korea costs $400 inthe United States. These prices suggest that the exchange rate between the wonand the dollar is:A)1.5 won per dollarB)0.75 won per dollarC)$1.50 per wonD)$3 per won5. To the US, U.S. capital inflows will create a __________ foreign currency and a__________ U.S. dollars.A)Demand for; supply ofB)Supply of; demand forC)Shortage of; demand forD)Supply of; shortage of6. U.S. imports of goods and services will create a __________ foreign currencyand a __________ U.S. dollars.A) Demand for; supply ofB) Supply of; demand forC) Shortage of; demand forD) Supply of; shortage of页23页，共2第浙江财经学院课程期末考试试卷7.If the spot price of the euro is $1.10 per euro and the 30-day forward rate is$1.00 per euro, and you believe that the spot rate in 30 days will be $1.05 pereuro, you can maximize speculative gains by:A)Buying euros in the spot market and selling the euros in30 days at thefuture spot rate.B)Signing a forward foreign exchange contract to sell the euros in 30days.C)Signing a forward foreign exchange contract to sell the dollars in 30days.D)Buying dollars in the spot market and selling the dollars in 30 days atthe future spot rate.8.Assume you are a Chinese exporter and expect to receive $250,000 at the end of60 days. You can remove the risk of loss due to a devaluation of the dollar by:A)Selling dollars in the forward market for 60-day delivery.B)Buying dollars now and selling it at the end of 60 days.C)Selling the yuan equivalent in the forward market for 60-day delivery.D)Keeping the dollars in the United States after they are delivered toyou.9. The interest rate in the U.K. is 4% for 90 days, the current spot rate is$2.00/￡ and the forward rate is $1.96/￡. If the covered interest rate differential isabout ?1%, then the interest rate in the U.S. for 90 days wouldhave to be:A)7%B)4%C)3%D)2%10. If the covered interest differential is zero:A)International investments will be unprofitable.B)Parity has not been reached.C)The overall covered return on a foreign-currency investment equalsthe return on a comparable domestic-currency investment.D)A currency is at a forward premium by as much as its interest rate ishigher than the interest rate in the other country.11. When uncovered interest parity holds:A)A currency is expected to appreciate by as much as its interest rate islower than the interest rate in the other country.B) A currency is expected to appreciate by as much as itsinterestrate is higher than the interest rate in the other country C) A currency is expected to depreciate by as much as its interest rate is lower than the interest rate in the othercountryD)The forward premium equals the interest rate differential.页23页，共3第浙江财经学院课程期末考试试卷12. International Fisher Effect refers to the condition when:A)Covered differential equals zero.B)Expected uncovered differential equals zero.C)Uncovered interest parity holds.D)Both (B) and (C).13. __________ purchasing power parity states that the difference betweenchanges over time in product-price levels in two countries will be offset by thechange in the exchange rate over this time.A)FullB)PartialC)RelativeD)Absolute14. The __________ approach to exchange rates emphasizes the importance ofthe supply and demand for money as a key to understanding the determinants ofexchange rates.A)Purchasing-power-parityB)Asset marketC)MonetaryD)Balance of payments15. Based on PPP and the quantity theory of money, if Japan's real income risesrelative to real income in the US, there should be a(n):A)Appreciation of the dollar.B)Appreciation of the yen.C)Interest rate parity.D)Depreciation of the yen.16..The __________ effect can sometimes be destabilizing because it moves theexchange rate away from its long-run equilibrium value.A) BandwagonB) BubbleC) Exchange rateD) Arbitrage17. The law of __________ states that a product that is easily and freely traded ina perfectly competitive global market should have the same price everywhere.A) International tradeB) One priceC) Diminishing returnsD) Relative PPP18..According to the relative version of purchasing power parity, when theforeign country inflation rate increases, the home country's:A)Currency tends to depreciate.B)Currency tends to appreciate.C)Inflation rate tends to decrease.D)Inflation rate tends to stay the same.19..Which of the following are in place when government imposes limits on or页23页，共4第浙江财经学院课程期末考试试卷requires approvals for payments related to some (or all) international financialactivities?A)Exchange controls.B)Capital controls.C)Official interventions.D)Adjustable pegs.20. Pressures in the foreign exchange market are such as to cause the Britishpound to appreciate with respect to the U.S. dollar. If Britain is trying tomaintain a fixed exchange rate with respect to the U.S. dollar, which of thefollowing interventions will stem the pressures for appreciation of the pound?A)Britain should sell pounds and buy dollars.B)Britain should do nothing as a fixed rate will not change.C)Britain should buy pounds and sell dollars.D)Britain should decrease their money supply to contract the economy.21. Faced with ever increasing outflows of gold in the late 1960's, the UnitedStates:A)Used contractionary fiscal policies to rid the nation of deficits.B)Devalued the dollar in terms of gold.C) Suspended the convertibility of dollars into gold.D) Imposed foreign exchange controls.22. .If the marginal propensity to save is 0.3 and the marginal propensity toimport is 0.1, and the government increases expenditures by $10 billion, ignoringforeign-income repercussions(回流效应), how much will GDPrise?A)$20 billion.B)$10 billion.C)$25 billion.D)$15 billion.23.The IS curve illustrates:A)All combinations of domestic output levels and interest rates for whichthe domestic product market is in equilibrium.B)All combinations of domestic output levels and interest rates for whichthe domestic money market is in equilibrium.C)All combinations of domestic output levels and interest rates thatresults in a zero balance for the country's official settlements balance.D)All combinations of domestic output levels and interest rates for whichthere is full employment.24.The LM curve has a:A)Positive slope because a higher interest rate leads to a decrease inthe demand for money and thus a higher level of domestic production is needed to cause people to continue to hold thesameamount of money.B)Negative slope because a higher interest rate leads to a decreasein the demand for money and thus a higher level of domestic 页23页，共5第浙江财经学院课程期末考试试卷production is needed to cause people to continue to hold thesameamount of money.C)Negative slope because a higher interest rate leads to a decreasein aggregate demand and thus a lower level of domestic production is needed for equilibrium.D)Positive slope because a higher interest rate leads to a decrease inaggregate demand and thus a higher money supply is needed for equilibrium.25. Official intervention in the foreign exchange market to defend a fixedexchange rate when the value of domestic currency is under downward pressure:A）Causes international reserve holdings to rise.B）Has no impact on the domestic money supply.C）Causes the domestic money supply to rise.D）Causes the domestic money supply to fall.26. Floating exchange rates ensure:A) Full employment domestically.B) Domestic price stability.C) Equilibrium in the overall balance of payments.D) A surplus in the trade balance.27. There are limits to the ability of monetary authoritiesto use sterilizedintervention in the case of a surplus because:A)The central bank may be unwilling to increase its holdings of foreigncurrency.B) Pressure from foreign countries to allow the domestic currency todepreciate will lead to large losses.C)The central bank is limited in its ability to obtain foreign currency.D)There are no limits on the use of sterilized intervention.28. Under a floating exchange rate regime, following an expansion in the moneysupply, monetary authorities will:A) Buy foreign currency in the foreign exchange market.B) Buy domestic currency in the foreign exchange market.C) Do nothing in the foreign exchange market.D) Sell domestic currency in the foreign exchange market.29.Given the IS-LM-FE framework and an overall payments balance of zero, ifthe country implements expansionary monetary policy, the LM curve will shift tothe __________ which will lead to the country's currency__________. Inresponse, the FE and IS curves will shift to the __________ and external balancewill be reestablished.A) left; appreciating; rightB) left; depreciating; leftC) right; depreciating; rightD) right; appreciating; right30. Under a floating exchange rate regime with a low degree of capital mobility,expansionary fiscal policy will lead to:页23页，共6第浙江财经学院课程期末考试试卷A) Higher interest rates.B) Lower interest rates.C) Capital outflows.D) A surplus in the official settlements balance.Part II, True or False (10*1.5=15 score)( T for true and F For false, you are not required to give reason for your choice)1.If a currency is at a forward premium by as much as its interest rate is lowerthan the interest rate in the other country, covered interest parity holds.2. Contractionary fiscal policy with floating exchange rates and low capitalmobility leads to currency depreciation.3. Over the long-run, a country with a relatively high inflation rate tends to havea depreciating currency.4.The quantity theory of money says that in any country the money supply isequated to the demand for money, which is directly proportional to themoney value of the gross domestic product.5.With fixed exchange rates, external capital flow shocks have little impact onthe internal economy.6.The Bretton Woods conference created the International Monetary Fund(IMF).7.The official settlements balance is in deficit if the IS-LM intersection is to theright of the FE curve.8.(P*e / P) is a useful indicator of a country's international price f competitiveness.9.The assignment rule says that, with fixed exchange rates, fiscal policy shouldbe assigned to stabilizing the balance of payments and monetary policyshould be assigned to stabilizing the domestic economy. 10.The J curve shows a typical response of the current account balance to a dropin the exchange rate value of a country's currency.Part III: Questions(6*6=36 score)1.You are provided with the following information about a country'sinternational transactions during a given year:Service exports $ 346Service imports $354Merchandise exports $480Merchandise imports $348Income flow, net $153Unilateral transfers, net $142Increase in the country holding of foreign assets, net $352 (excluding official reserves assets)页23页，共7第浙江财经学院课程期末考试试卷Increase in foreign holding of foreign assets, net $252 (excluding official reserves assets)Statistical discrepancy, net $154 Calculate the official settlements balance and the current account balance. Isthe country increasing or decreasing its net holdings of official reserve assets?Why?2. The following rates exist:Current spot exchange rate: $1.8/￡Annualized interest rate on 90-day dollar-denominated bonds: 8% (2% for 90days)Annualized interest rate on 90-day pound-denominated bonds: 12% (3% for90 days)Financial investor expect the spot exchange rate to be $1.77/￡ in 90 days,A)With the uncovered interest differential to make judgment that if he bases hisdecisions solely on the difference in the expected rate of return, should aU.S.-based investor make an uncovered investment inpound-denominated bondsrather than investing in dollar-denominated bonds? Why?B) if there is substantial uncovered investment seeking higher expected returns,what pressure is placed on the current spot exchange rate?3.What is the exchange rate overshooting, why does it occur?4.Assume that a government has become committed to maintaining a fixedexchange rate that officially values foreign currencies less, and the domesticcurrency (here the dollar) more, than the free market equilibrium rate. Theofficial rate is, say, $1.0 per pound sterling. This exchange controls result inconsiderable costs to a country whose government imposes them. Describethese costs and the role that bribery and parallel markets can play ineconomies with exchange controls.Figure: Welfare Losses from Exchange Controls页23页，共8第浙江财经学院课程期末考试试卷 $/￡A E1.5B C￡￡B 30begins at a country 5. Use the standard IS-LM-FE framework and assume thefollowing exchange rate. What effect will the triple intersection under floatinghave on domestic interest rates, output levels, and the official settlements balance,assuming low capital mobility?(you are suggested explain with figure)The central bank increases the money supply. a.The government increases its spending.b.6.Explain the effects of expanding the money supply on the economy of a countrytriple a begins at exchange with fixed rates. (Assume the countryintersection ,you are suggested explain with figure)Part III, Reading and analysis (9 score for paper1 and 10 score forpaper 2))体制(1: China to further reform RMB exchange rate regime, （PBOC）Bank The People's of Chinaproceed decided to central China's bank, hasRenminbi the the further with reform ofexchange rate regime to enhance the （RMB）spokespersonflexibility, a rate RMB exchange 2010,on Jun 19, said central of the bank 页23页，共9第浙江财经学院课程期末考试试卷Saturday Beijing.The decision was made in view of therecent economic situation and financial marketdevelopments at home and abroad, and thebalance of payments (BOP) situation in China,the spokesperson said in a statement.In further proceeding with the reform,continued emphasis would be placed toreflecting market supply and demand withreference to a basket of currencies. Theexchange rate floating bands will remain thesame as previously announced in the inter-bankforeign exchange market, the spokesman said.The spokesperson said China's externaltrade is becoming more balanced. The ratio ofcurrent account surplus to GDP, after a notablereduction in 2009, has been declining since thebeginning of 2010.With the BOP account moving closer toequilibrium,thebasisforlarge-scaleappreciation of the RMB exchange rate does notexist, the spokesperson said. 页23页，共10第浙江财经学院课程期末考试试卷The PBOC will further enable market toplay a fundamental role in resource allocation,promote a more balanced BOP account,maintain the RMB exchange rate basicallystable at an adaptive and equilibrium level, andachieve the macroeconomic and financialstability in China, the spokesperson said.China has moved into a managed floatingexchange rate regime based on market supplyand demand with reference of a basket ofcurrencies since July 1, 2005. The spokesperson said the reform of theRMB exchange rate regime has been makingsteady progress since 2005, producing theanticipated results and playing a positive role.( On July 21, 2005, the People's Bank of China,announced that the RMB yuan, will be traded ata rate of 8.11 to the US and the yuan to USdollar pegging system is switched to a basket offoreign currencies.)With the current round of internationalfinancial crisis was at its worst, the exchange页23页，共11第浙江财经学院课程期末考试试卷rate of a number of sovereign currencies to theUS dollar depreciated by varying margins.The stability of the RMB exchange ratehas played an important role in mitigating(缓解)the crisis' impact, contributing significantly toAsian and global recovery, and demonstratingChina'seffortsinpromotingglobalrebalancing, the spokesperson said.The gradual recovery of the global economy and upturn of the Chineseeconomyhas become more solid with enhanced economicstability. It is desirable to proceed further withreform of the RMB exchange rate regime andincrease the RMB exchange rate flexibility, saidthe spokesperson.Question1：Why the spokesperson said.With the BOP account moving closer toequilibrium, the basis forlarge-scaleappreciation of the RMB exchange rate does notexist,bank Question2: Why the Chinese Centraltheof the to would like proceed reform页23页，共12第浙江财经学院课程期末考试试卷Renminbi （RMB） exchange rate regime toenhance the RMB exchange rate flexibility. Canyou explain the benefit by making the RMBmore flexible?2: Hot money flow and its explanationThe generally accepted view is that theinflowofshort-termspeculativemoney(so-called hot-money) began in 2007 in Chinatargeting capital gains derivedfrom rising stockand property prices and the anticipatedappreciation of the RMB. “hot money” isdefined as the flow of funds counted as capitaland financial account other than for directinvestment and errors and omissions. In otherwords, “hot money” is defined as “changes inreserve assets” minus “changes in currentaccount” minus “directinvestment flows”. Thisis the simplest way to express the movement ofshort-term funds, and the most conservative, asthe estimates tend to be smaller.When adjustments are made for the some页23页，共13第浙江财经学院课程期末考试试卷policy measures, the BoPstatistics indicate thataccelerated inflows into China “hot money ”2007, from 22.5 billion USD in the first half of2007, of second half 70.2 billion USD in the toof first half billion USD in the and up to 139.1of USD 184.8 a huge billion 2008. In contrast,of half the second in “hot money ” flowed out2008 (2008, 2H)(Figure 1).Figure 1: Hot money in China after adjustmentForeignDirectCurrentHotSome people says that the huge inflow of hotof price the increasing for money is the reasonto order property and price. In price stockcheck this point, here we give two figures about页23页，共14第浙江财经学院课程期末考试试卷the Shanghai Stock index and Property (资产)Price index of different regions includingShangHai, Shengzhen, Beijing.Figure 2: Shanghai Stock IndexFigure 3: Property Price index.页23页，共15第浙江财经学院课程期末考试试卷We find that Stock prices peaked in Octobertrend a downward thereafter 2008, and beganto began in (Figure 2). Growth property prices3) of 2008 (c) (Figure first fall in the halfalthough the hot money inflow go to its peak atthe same time.Figure 4: RMB exchange rate and interest rate parity InterestRMBForwardofChangethe RMB forward exchange rate shifted From the above figure 4, we find thatafter the rapid appreciation of the RMB spot exchange rate, and deviated frominterest rate parity from late-2007 until the autumn of 2008. The distance frominterest rate parity widened most in the first half of 2008. This is because spotexchange rates are under the control of the authorities while forward exchangerates are not, and their appreciation reflected market participants' expectation of页23页，共16第浙江财经学院课程期末考试试卷spot rate appreciation in the following period. As a consequence, the RMBforward exchange rate moved toward appreciation, and the difference betweenthe RMB forward rate and spot rate began to deviate from interest rate parity inMay 2007, peaking in March 2008.Figure 5: Returns from arbitrage transactions using RMB forward exchangerateQuestion 1: From fighre1,2,3, do you agree withthe such idea that the huge hot money inflow isthe main force that pushes the Chinese stockprice and property price increase and raises thebubbles. Why?Question 2: With the figure 1, 4, 5 would youplease explain the relationship between RMBappreciation and hot money inflow by the assetmarket approach, say, the covered interestdifferential equation and covered interest parity.页23页，共17第浙江财经学院课程期末考试试卷学年第一学期2009～2010浙江财经学院卷）答案 A )》课程期末考试试卷（《国际金融(双语）（10*1=10PART I: Multiple choice 16-20 ABBBA 6-10 ACACC11-15 ADCCB 1-5 AAAAB26-30CACCA 21-25 CCAADPART II TRUTH OR FALSE(10*1.5=15)10 T 9 F 7T 8T 2 F 3 T 4T 5F. 6T 1TPART III: Questions(6*6=36)Question 1:POSSIBLE RESPONSE:348 + 153 - 142 = $135354 + 480 ?Current account balance: $346 ?352 + –??354 + 480348 +153 -142 + 252 Official settlements balance: $346154 = $189$189. ?Change in official reserve assets (net) = ?officialsettlements balance =The country is increasing its net holdings of official reserve assets.Question 2:POSSIBLE RESPONSE:uncovered expected investor, the of view of the U.S.-based the a)From pointthe Because is [(1+0.03)*1.77/1.8]-(1+0.02)=-0.0072.interest differentialbased investor should stay at home, investing in differential is negative, the U.S –dollar-denominated bonds, if he baseshis decision on the difference in expectedreurns.the Britain to investment flowing from there b) If is substantial uncoveredUnited States, this increases the supply of pounds in the spot exchange market.There is downward pressure on the spot exchange rate to drop below $1.8/pound.The pound teds to depreciate.Question 3:POSSIBLE RESPONSE:monetary of the version because in this sticky price Overshooting occursapproach, prices are assumed to be fixed in the short run and completely flexiblein the increase for of A considerable amount time must passrun. the in longmoney supply to lead to an increase in domestic prices. Thus, purchasing powerparity is more realistically assumed to hold in the long run but not in the shortrun. Because prices are sticky at first, the increase in money supply drives downdomestic interest rates. This shift favors foreign currency assets which results inimmediate depreciation of the domestic currency. As prices adjust, the domesticcurrency reverts back to its new long run equilibrium.页23页，共18第浙江财经学院课程期末考试试卷Question4、Assume that a government has become committed tomaintaining afixed exchange rate that officially values foreign currencies less, and the domesticcurrency (here the dollar) more, than the free market equilibrium rate. Theofficial rate is, say, $1.0 per pound sterling. This exchange controls result inconsiderable costs to a country whose government imposes them. Describe thesecosts and the role that bribery and parallel markets can play in economies withexchange controls.Figure: Welfare Losses from Exchange ControlsPOSSIBLE RESPONSE:The exchange controls require exporters to turn over all their revenues fromforeign buyers to the government. The government, in turn, gives them $1.0 indomestic bank deposits for each pound sterling they have earned. In Figure 20.2,the exchange control limits the foreign currency available to 30 billion pounds,which is the amount earned by the country's exporters at the exchange rate of$1.0 per pound. Even if those who most value the limited foreign currency get it,the country suffers a loss of well being equal to the triangulararea depicted byCEA.Actual exchange control regimes are likely to have other effects and costs.One such example is the efforts evade exchange controls. People are frustratedwhen they are not allowed to buy foreign exchange, even though they are willingto pay more than the recipients of foreign exchange will get from the governmentwhen these holders sell their foreign currency. The frustrated demanders willlook for other ways to obtain foreign exchange. One way is to bribe thegovernment functionaries in charge of determining the official approvals.Another is to offer more to recipients of foreign exchange than the government isoffering. In this way a second foreign exchange market, a parallel market orblack market, develops as a way for private demanders and sellers of foreignexchange to evade exchange controls. Parallel markets exist in most countriesthat have exchange controls.5. Use the standard IS-LM-FE framework and assume the country begins at atriple intersection under floating exchange rate. What effect will the followinghave on domestic interest rates, output levels, and the official settlements balance,assuming low capital mobility?(you are suggested explain with figure)a.The central bank increases the money supply.b.The government increases its spending.POSSIBLE RESPONSE:a.The LM curve shifts to the right, and the country moves to a newshort-run equilibrium at the intersection of the IS curve and the newLM curve. The domestic interest rate decreases, real GDP increases,and the official settlements balance goes into deficit. Withtheincrease in the money supply, it is temporarily greater than moneydemand. To bring about an equilibrium in the money market, interest页23页，共19第浙江财经学院课程期末考试试卷rates must fall. The fall in interest rates increases interest-sensitivespending, so the GDP output level increases. There is now a paymentdeficit because the new intersection of the IS and LM curves takesplace to the right of the FE curve.b.The IS curve shifts to the right, and the country moves to a newshort-run equilibrium at the intersection of the LM curve and the newIS curve. Real GDP increases, the domestic interest rate increases,and the official settlements balance goes into deficit. This newintersection occurs to the right of the relatively steep FE curve, whichcorresponds to a payments deficit.The figure is neglected.6. Explain the effects of expanding the money supply on the economy of acountry with fixed exchange rates. (Assume the country begins at a tripleintersection , you are suggested explain with figure) POSSIBLE RESPONSE:Beginning from an external balance, an expansion in the money supplyincreases bank liquidity. In the short run, as banks compete with each other tolend money, interest rates are bid down. The fall in interest rates causes someholders of financial assets denominated in the domestic currency to seek higherreturns abroad. The international capital outflow causes the financial account todeteriorate. the currency of this country will under the。