International Banking and Lending Components
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Questions and Answers

What impact does the increasing importance of international stock markets have on financial capital flow?

  • It has no effect on financial capital flow
  • It causes financial capital flow to become stagnant
  • It hinders the flow of financial capital
  • It facilitates the flow of financial capital to its most productive use (correct)

    • How do movements of stock prices across countries tend to behave as a result of the increased interdependence in the global economy?

  • They tend to become more similar (correct)
  • They tend to become more diverse
  • They tend to have no correlation
  • They tend to become more volatile

    • What happens when the Federal Reserve raises U.S. interest rates by 1⁄2 of a percentage point?

  • The spot rate for the dollar rises
  • The dollar appreciates (correct)
  • The demand for eurodollars decreases
  • The eurodollar lending rate falls

    • What does the covered interest arbitrage parity indicate about investor behavior between domestic and foreign investments?

    <p>Investors are indifferent between domestic and foreign investments under certain conditions</p> Signup and view all the answers

    How does the higher U.S. interest rate impact the demand for pounds in the spot market?

    <p>Increases the demand for pounds</p> Signup and view all the answers

    What are the three components that gross international bank lending can be divided into?

    <p>Domestic bank loans in domestic currency to nonresidents, domestic bank loans in foreign currency to nonresidents, and domestic bank loans in domestic currency to domestic residents</p> Signup and view all the answers

    What gives U.S. exporters the ability to leave dollars in an account in a foreign bank?

    <p>Eurodollar deposits</p> Signup and view all the answers

    What is the significance of Eurodollar markets on the international financial system?

    <p>Increased international mobility of financial capital</p> Signup and view all the answers

    What is the amount that will be paid to the lender when a bond matures?

    <p>Face value</p> Signup and view all the answers

    How have countries' interest rates been affected by the increasing importance of international bond markets?

    <p>Moved toward each other</p> Signup and view all the answers

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