Recent Question

Which of the following is a capital expenditure 1. When a closely held corporation issues preference shares for land, the land should be recorded at the a. total par value of the shares issued. b. total book value of the shares issued. c. total liquidating value of the shares issued. d. fair value of the land. 2. Accounting recognition should be given to the gain realized on a non-monetary exchange of plant assets except when the ...

Other / Other 11 May 2016

Our trade account has remained in a deep deficit even though the dollar has fallen sharply "If inflation exists in the rest of the world, but not in Canada, Canada's merchandise trade surplus should soar with exports becoming cheap and imports expensive. Of course, that would stimulate economic activity in Canada and, pretty soon, the inflation rate would begin to rise. How would the authorities counter that undesirable development? By ke ...

Other / Other 11 May 2016

What most likely happened to interest rates 1. "But economists predict most countries will conclude that their best course is to make floating rates more tolerable, for example, by increasing opportunities for companies and banks to hedge themselves against currency swings." What is meant by "to hedge themselves against currency swings"? a) engaging in simultaneous buying and selling of foreign currency 140 b) requiring of foreigners ...

Other / Other 11 May 2016

Under flexible exchange rates a small open economy should Suppose the Canadian and U.S. economies, on a flexible exchange rate, have real growth rates of 2% and a risk premium of 1% (Canada is riskier). The Canadian money growth rate is 10%, the U.S. money growth rate is 7% and the U.S. real interest rate is 3%. 1. The Canadian nominal interest rate is a) 10% or less b) 11% c) 12% d) more than 12% 2. The value of the Canadian dollar ...

Other / Other 11 May 2016

What meaning would be attached to a statement that a currency is undervalued by this PPP measure 1. "The record has not been good. Our past experience with exchange rate depreciation has been that all too often it has led, not to a sustained improvement in our competitiveness, but to ....." Complete this clipping. a) a rise in our unemployment b) a fall in our prices and wages c) no change in our competitiveness d) a deterioration in ...

Other / Other 11 May 2016

This worst of all possible worlds most likely happened because the Fed effort to lower interest rates 1. "At the same time that Secretary Blumenthal was testifying to Congress, the Treasury borrowed $1.6 billion in Germany in the form of securities denominated in marks. It offered to pay a interest rate of roughly 6% per year on mark-denominated three- and four-year securities. On comparable securities denominated in dollars, the Treasury ...

Other / Other 11 May 2016

Exporters and some economists have argued that the central bank should drive 1. "Tying the Canadian dollar to the U.S. dollar may eliminate some worries, but it will create others, among them concern that the U.S. might not be as dedicated as Canada is to fighting inflation." This is of concern to Canadians because Canada will be a) unable to adopt its own fiscal policy b) forced to experience the higher U.S. inflation rate c) force ...

Other / Other 11 May 2016

If there is a risk differential of 1% pt. between countries A and B then their 1. If there is a risk differential of 1% pt. between countries A and B then their a) real i rates should differ by 1% pt. b) nominal i rates should differ by 1% pt. c) nominal i rates should differ by 1% pt. plus the difference in their real growth rates d) real i rates should differ by 1% pt. plus the difference in their real growth rates 2. If the Can ...

Other / Other 11 May 2016

How can higher interest rates be anti-inflationary 1. "Years of high growth generally ____ inflation, which in turn prompts the Federal Reserve to _____ interest rates, a step that runs the risk of triggering _____." The blanks are best filled with a) fuel; raise; a recession b) reduce; cut; a recession c) fuel; lower; inflation d) reduce; raise; inflation 2. "The Federal Reserve chairman told congress that "the Fed is unlikely to ra ...

Other / Other 11 May 2016

Approximately what forward exchange rate do you expect to pay 1. Suppose the United States and Canadian economies are in mutual equilibrium with a flexible exchange rate, both with long-run real growth of 2 percent. The U.S. money supply growth rate is 8 percent and its real interest rate is 3 percent. If the risk premium (Canada is riskier) is 1 percent, and the value of the U.S. dollar is appreciating by 1.5 percent per year, what is Ca ...

Other / Other 11 May 2016