1. The principle focus of the IMF bailout efforts during the Asian financial crisis was ________.

   a. banking liquidity

   b. dollarization of Asian currencies

   c. reestablishing fixed currency exchange rates in Asia

   d. shareholder's wealth

2. The authors compromise as to the key factors for exchange rate determination. They conclude that ________ is important in the short run, but that ________ determines long run exchange rates.

   a. the Fisher effect; PPP

   b. asset markets, interest rates, and expectations; PPP

   c. the Fisher effect; asset prices, interest rates, and expectations

   d. PPP, the Fisher effect

3. Despite inadequacies in estimating long-term exchange rate values, fundamental theories of exchange rates have proved remarkably accurate for the short- and medium-term.

   a. true

   b. false

4. The important thing to remember about foreign exchange rate determination is that parity conditions, asset approach, and balance of payments approaches are ________ theories rather than ________ theories.

   a. complementary; contiguous

   b. competing; contemporary

   c. competing; complementary

   d. complementary; competing

5. ________ approach to exchange rate determination reflects supply and demand for foreign currencies.

   a. The Asset Market

   b. The Balance of Payments

   c. The Purchasing Power Parity

   d. The International Fisher Effect

6. The authors suggest that exchange rates do adhere to fundamentals in the long-term with substantial deviations from fundamentals in the short-term.

   a. true

   b. false

7. ________ is the most widely accepted of all exchange rate forecasting theories.

   a. Purchasing Power Parity

   b. Sarbanes-Oxley

   c. The Balance of Payments approach

   d. The Asset Market approach

8. Overshooting in the currency market is the practice of always estimating forward rates too high to avoid more expensive undershooting errors.

   a. true

   b. false

9. The 'tequila effect' is a slang term used to describe a form of financial panic called ________.

   a. contrary investing

   b. speculation

   c. contagion

   d. run on the market

10. The ________ provides a means to account for international cash flows in a standardized and systematic manner.

   a. parity conditions theory

   b. balance of payments theory

   c. international Fisher effect

   d. asset approach