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One Way by Which the World Bank Converts Gross National

question 23

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One way by which the World Bank converts gross national income (GNI) figures to dollars is to take the GNI in a local currency and convert using the exchange rate, averaged over a three-year period in order to smooth out the effects of currency fluctuations. Which of the following is a shortcoming of this method for international comparisons of standards of living?


Definitions:

Coupon Rate

The annual interest rate paid by a bond issuer to its bondholders, expressed as a percentage of the bond's face value.

Inflation Rate

The speed at which prices for products and services ascend, resulting in a decline in how much can be bought.

Market Conversion Value

The value of a convertible security if it is converted into a different form, usually stock, at its current market price.

Conversion Ratio

The number of common shares received upon the conversion of a convertible security, such as a convertible bond or preferred stock.

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