LOS b: Discuss the factors that favor international market integration.

Q1. Which of the following is NOT a factor that favors international market integration?

A)   International tax laws are determined by the International Monetary Fund (IMF).

B)   Many institutional investors diversify internationally.

C)   Governments borrow and lend internationally.

Q2. International market integration requires significant international capital mobility. In terms of volume of transactions, what has happened to international capital flows over the past two decades?

A)   International capital flows have increased dramatically.

B)   As a percent of domestic gross domestic product (GDP), international capital flows have remained constant.

C)   International capital flows have increased modestly.

Q3. Which of the following factors favors international market integration even in the presence of barriers to international capital mobility?

A)   Small investors are generally well diversified internationally.

B)   Multinational corporations borrow and lend internationally.

C)   The international banking system is primarily regulated by the World Bank.

Q4. Which of the following will NOT encourage international market integration?

A)   International political stability.

B)   Widespread use of the international capital asset pricing model (ICAPM).

C)   Absence of trade restrictions.

LOS b: Discuss the factors that favor international market integration. fficeffice" />

Q1. Which of the following is NOT a factor that favors international market integration?

A)   International tax laws are determined by the International Monetary Fund (IMF).

B)   Many institutional investors diversify internationally.

C)   Governments borrow and lend internationally.

Correct answer is A)

There is little in the way of uniform international tax law. Further, the IMF does not determine tax law. The other factors listed promote market integration.

Q2. International market integration requires significant international capital mobility. In terms of volume of transactions, what has happened to international capital flows over the past two decades?

A)   International capital flows have increased dramatically.

B)   As a percent of domestic gross domestic product (GDP), international capital flows have remained constant.

C)   International capital flows have increased modestly.

Correct answer is A)

The past two decades have witnessed large increases in the volume of international capital flows.

Q3. Which of the following factors favors international market integration even in the presence of barriers to international capital mobility?

A)   Small investors are generally well diversified internationally.

B)   Multinational corporations borrow and lend internationally.

C)   The international banking system is primarily regulated by the World Bank.

Correct answer is B)

Multinational corporations borrow and lend on an international scale. This tends to promote international capital mobility and forces international competition in the credit markets.

Q4. Which of the following will NOT encourage international market integration?

A)   International political stability.

B)   Widespread use of the international capital asset pricing model (ICAPM).

C)   Absence of trade restrictions.

Correct answer is B)

Widespread use of the ICAPM will not enhance market integration. If markets are integrated, then the ICAPM will be a useful model for international asset pricing.