Which of the Following Does NOT Illustrate the Benefit of Reduced

question 30

Multiple Choice

Which of the following does NOT illustrate the benefit of reduced exchange rate variability that comes with the adoption of a single currency?

• A) An Austrian carpet retailer that had previously limited its imports of Belgian carpets because of the uncertainty of the future value of the Belgian franc now imports more Belgian carpet.
• B) A Spanish bank that had previously not had a subsidiary in Italy because of the unpredictability of the future value of the Italian lira now buys an Italian bank.
• C) A German bakery company that had previously paid its bank in order to buy French francs forward to pay for imports of French wheat no longer incurs the cost of engaging in forward foreign exchange contracts.
• D) An Italian company that had not previously imported Dutch flowers because there was little demand for them now begins to import flowers from the Netherlands and promote them heavily.

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Definitions:

Amendment

A formal change or addition proposed or made to a document, statute, or legal contract.

Veto

The power to unilaterally stop an official action, especially the enactment of legislation.

Enact

To make into law by official decree.

Congress

A national legislative body, primarily responsible for making laws.