Multinational Financial Management by Alan Shapiro: Country Risk Analysis
CHAPTER 6
Country Risk Analysis
EASY (definitional)
6.1 The degree of political risk faced by a firm operating in a foreign country
a) can be determined by using a political risk index
b) depends on the benefits provided by the firm
c) both a and b
d) depends on how the firm has structured its operations
Ans: d
Section: Measuring political risk
Level: Easy
6.2 One good indicator of political risk is
a) the seriousness of capital flight
b) the level of local interest rates
c) the level of local tax rates
d) a large middle class population
Ans: a
Section: Capital flight
Level: Easy
6.3 Capital flight occurs for several reasons, most of which have to do with
a) government regulations on interest rates
b) high taxes on local investments
c) the threat of government seizure of local assets
d) inappropriate economic policies
Ans: b
Section: Capital flight
Level: Easy
6.4 Expropriation or creeping expropriation is most likely in the ‑‑‑‑‑‑ sector of an economy.
a) manufacturing
b) agricultural
c) construction
d) extractive
Ans: d
Section: Market-oriented versus statist policies
Level: Easy
6.5 The great economic lesson of the ill-fated, post-World War II experiment in Communism is that _________ work and command economies do not.
a) state subsidies
b) market forces
c) five-year plans
d) centralized economic controls
Ans: d
Section: Market-oriented versus statist policies
Level: Easy
6.6 A large government deficit relative to GDP, a high rate of money expansion accompanied by fixed exchange rates, along with substantial government expenditures are some of the common characteristics of _________ risk.
a) exchange rate
b) interest rate
c) country
d) investment Ans: c
Section: Key indicators of country risk
Level: Easy
6.7 A structure of incentives that rewards risk taking in productive ventures is an indicator of long-run _____________ health for a country.
a) social
b) political
c) economic
d) spiritual
Ans:
Country Risk Analysis
EASY (definitional)
6.1 The degree of political risk faced by a firm operating in a foreign country
a) can be determined by using a political risk index
b) depends on the benefits provided by the firm
c) both a and b
d) depends on how the firm has structured its operations
Ans: d
Section: Measuring political risk
Level: Easy
6.2 One good indicator of political risk is
a) the seriousness of capital flight
b) the level of local interest rates
c) the level of local tax rates
d) a large middle class population
Ans: a
Section: Capital flight
Level: Easy
6.3 Capital flight occurs for several reasons, most of which have to do with
a) government regulations on interest rates
b) high taxes on local investments
c) the threat of government seizure of local assets
d) inappropriate economic policies
Ans: b
Section: Capital flight
Level: Easy
6.4 Expropriation or creeping expropriation is most likely in the ‑‑‑‑‑‑ sector of an economy.
a) manufacturing
b) agricultural
c) construction
d) extractive
Ans: d
Section: Market-oriented versus statist policies
Level: Easy
6.5 The great economic lesson of the ill-fated, post-World War II experiment in Communism is that _________ work and command economies do not.
a) state subsidies
b) market forces
c) five-year plans
d) centralized economic controls
Ans: d
Section: Market-oriented versus statist policies
Level: Easy
6.6 A large government deficit relative to GDP, a high rate of money expansion accompanied by fixed exchange rates, along with substantial government expenditures are some of the common characteristics of _________ risk.
a) exchange rate
b) interest rate
c) country
d) investment Ans: c
Section: Key indicators of country risk
Level: Easy
6.7 A structure of incentives that rewards risk taking in productive ventures is an indicator of long-run _____________ health for a country.
a) social
b) political
c) economic
d) spiritual
Ans: