41. The price of one currency stated in terms of another currency is the:
A. Current ratio.
B. Exchange rate.
C. Facilitating payment.
D. International clearing price.
42. When the government uses central planning to allocate resources and to determine output among various segments of the economy, this is known as:
A. A dictatorship.
B. A democracy.
C. A planned economy.
D. A market economy.
43. If the exchange rate for a foreign currency (stated in dollars) has risen, a dollar will purchase:
A. An increased amount of that foreign currency.
B. An unchanged amount of that foreign currency.
C. A smaller amount of that foreign currency.
D. An undetermined amount of that foreign currency.
44. Consider the following statement: "A strong dollar rose sharply against the British pound, but fell slightly against the Japanese yen." This statement indicates that:
A. The British pound is a stronger currency than the Japanese yen.
B. The exchange rate for the yen, stated in dollars, is rising.
C. The exchange rate for the pound, stated in dollars, is rising.
D. The exchange rate for the yen, stated in pounds, is falling.
45. Assume the exchange rate for the Canadian dollar is rising relative to the U.S. dollar. An American company will incur losses from this rising exchange rate if it is making:
A. Credit sales to Canadian companies at prices stated in Canadian dollars.
B. Credit purchases from Canadian companies at prices stated in U.S. dollars.
C. Credit sales to Canadian companies at prices stated in U.S. dollars.
D. Credit purchases from Canadian companies at prices stated in Canadian dollars.
46. Assume the exchange rate for the Mexican Peso is falling relative to the U.S. dollar. An American company will incur losses from this falling exchange rate if the company is making:
A. Credit sales to Mexican companies at prices stated in U.S. dollars.
B. Credit purchases from Mexican companies at prices stated in U.S. dollars.
C. Credit sales to Mexican companies at prices stated in Mexican Pesos.
D. Credit purchases from Mexican companies at prices stated in Mexican Pesos.
47. Which of the following is true about foreign trade zones?
A. They are illegal in the United States.
B. Goods imported into these designated U.S. areas are duty free until they leave the zone.
C. They have a special excise tax.
D. They are areas outside the United States that offer special tax treatments.
48. Blue Waters is an American company that does business with several Japanese corporations. In recent months, Blue Waters has been reporting losses from increases in the exchange rate of the Japanese yen. The majority of Blue Waters transactions with the Japanese companies probably consist of:
A. Credit sales at prices stated in U.S. dollars.
B. Credit sales at prices stated in Japanese yen.
C. Credit purchases at prices stated in U.S. dollars.
D. Credit purchases at prices stated in Japanese yen.
49. A corporation that uses a strategy of hedging all contracts specifying a foreign currency (i.e. foreign accounts receivable and foreign accounts payable):
A. Will always be better off than if the contracts were not hedged.
B. Recognizes a net loss if the foreign exchange rate increases.
C. Avoids net losses from fluctuations in foreign exchange rates.
D. Recognizes a net gain if the foreign exchange rate increases.
50. Samson Corporation buys a foreign currency future contract as a hedging strategy to protect against possible losses from fluctuations in a particular foreign exchange. This strategy suggests that Samson Corporation has:
A. Foreign accounts payable and expects the exchange rate to fall.
B. Foreign accounts receivable and expects the exchange rate to rise.
C. Foreign accounts payable and expects the exchange rate to rise.
D. Foreign accounts receivable and expects the exchange rate to fall.