Question Details

Citicorp would make money at the expense of the Bank of England by 



1. "He says an overvalued dollar would be just another blow to an already fragile economy." An overvalued dollar would be a blow to the economy because it would 
a) decrease exports b) encourage capital inflows 
c) increase the domestic money supply 
d) increase demand for import-competing goods and services 
2. "Now it's the once-mighty German mark's turn to come under attack. Following Thursday's cuts in the Bundesbank's trend-setting interest rates, the mark slipped further against the pound and the US dollar." The mark is falling because the cut in the German interest rate has 
a) decreased capital inflows, decreasing demand for the mark 
b) increased capital inflows, decreasing demand for the mark 
c) decreased capital inflows, increasing demand for the mark 
d) increased capital inflows, increasing demand for the mark 
3. "Normally, a weak trade figure would send the dollar into a tailspin. But market players could be judging that signs indicate a still-strong U.S. economy, implying continued upward pressure on interest rates. Currency traders may be working on the 104 
expectation that the Fed is going to have to push up short-term rates to choke off some domestic demand." The tailspin is being avoided here because 
a) the balance of trade deficit is being offset by a capital account surplus 
b) the balance of trade deficit is being offset by a current account surplus 
c) the balance of trade surplus is being offset by a capital account deficit 
d) the balance of trade surplus is being offset by a current account deficit 
"Historically, the winners on the foreign exchange market are the big banks. Citicorp, for example, typically earns about $600 million a year from its currency trading operation. The losers? Central banks, for one. Recently the Bank of England bought pounds to _________ but the pound kept _______ and huge losses developed." 
4. The blanks are best filled with 
a) prevent the pound from falling; falling b) prevent the pound from falling; rising 
c) prevent the pound from rising; falling d) prevent the pound from rising; rising 
5. Citicorp would make money at the expense of the Bank of England by 
a) selling pounds for future delivery b) selling pounds for immediate delivery 
c) buying pounds for future delivery d) buying pounds for immediate delivery



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