22. The gold standard had its origin in the use of as a medium of exchange, unit

Question

22. The gold standard had its origin in the use of as a medium of exchange, unit of account, and store of value. A. the U.S. dollar B. the British pound C. paper currency D. gold coins 23. The Bretton Woods Agreement could only work if the U.S. had: A. high inflation and no balance-of-payments deficit. B. low inflation and no balance-of-payments deficit. C. low inflation and a current account deficit. D. high inflation and a capital account surplus. 24. The great virtue claimed for a pegged exchange rate is that it: A. imposes monetary discipline on a country B. leads to high inflation. C. leads to devaluation D. increases fluctuations in exchange rates. 25. All of the following are benefits of global capital markets, except: A. they increase the supply of funds available to borrowers. B. that the risk to the investment portfolio is reduced to below what could be achieved in a purely domestic capital market. C. they provide a wider range of investment opportunities to D. they have higher cost of capital as compared to purely domestic capital markets. 26. An equity loan: A. does not give its holder a claim to a firm's profit stream. B. is made when a corporation sells stock to investors. C. includes cash loans from banks and funds raised from the sale of corporate bonds to investors. D. requires the corporation to repay a predetermined portion of the loan amount at regular intervals regardless of how much profit it is making. 27, refers to movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an economy, rather than factors specific to an individual firm. A. Financial risk B. Portfolio risk C. Systematic risk D. Unplanned risk 28. Which of the following is a drawback of the eurocurrency market? A. High reserve ratio requirements B. Higher cost of transaction C. Lower interest rates on deposits D, Exposure to foreign exchange risk

Explanation / Answer

22) The gold standard used (D) gold coins as its medium of exchange, store of value and unit of account. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price.

23) The Bretton Woods system of monetary management established the rules for commercial and financial relations. A key point of this arrangement was that all countries pegged their currencies to the US dollar. The working of Bretton woods Aggrement required (B) low inflation and no bop deficit .

24) Under pegges exchange rate system the country fixes the value of its currency with respect to another currency or with a basket of commodities. But this leads to the problem of (B) high inflation.

25) It is false that (D) it has high cost of capital as compared to domestic market.

26) An equity loans consists of (D) corporations paying a predetermined portion of the loan amount regardless of ho much profit it is earning.

27) A (C) systematic risk affects all the firms in an economy. This type of risk is unpredictable and not completely avoidable.

28) Eurocurrency market consists of banks that have euro deposits. Euro deposist is dollar or any otherfreely convertible currency deposited in a bank outside its country of origin. The drawback is that (D) there is exposure to foreign exchange risk. Eurocurrency have lower lending rates due to high volumes and reduced transaction costs. They offer higher depoits rates than domestic rates.  

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