Stabilizing speculation reinforces market forces by intensifying an appreciation or a depreciation in a currency's exchange value.
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A currency speculator's goal is to buy a currency at a low price and immediately resell it at a higher price, thus realizing a riskless profit.
Which of the following is NOT cited as a good reason for hedging currency exposures?
A. Reduced risk of future cash flows is a good planning tool.
B. Reduced risk of future cash flows reduces the probability that the firm may not meet required cash flows.
Currency risk management increases the expected cash flows to the firm.
D. Management is in a better position to assess firm currency risk than individual investors.
From the early 1980s through today, who has been the largest net borrower in the world?
A. United States.
B. United Arab Emirates.
China.
D. Japan.
Which of the following is one of the usual policy changes included in an IMF prescription?
A. Temporary cartels in domestic product markets.
B. Changes in fiscal policy to reduce the government budget deficit.
C. Increased barriers to imports.
Decreased regulation of public sector enterprises.