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    Pure float exchange rate, degree of pass through

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    5. The authors of our text discuss the concept of the "Impossible Trinity" or the inability to achieve simultaneously the goals of exchange rate stability, full financial integration, and monetary independence. If a country chooses to have a pure float exchange rate regime, which two of the three goals is a country most able to achieve?
    (a) Monetary independence and exchange rate stability
    (b) Exchange rate stability and full financial integration
    (c) Full financial integration and monetary independence
    (d) A country cannot attain any of the exchange rate goals with a pure float exchange rate regime

    6. Sony of Japan produces DVD players and exports them to the United States. Last year the exchange rate was ¥130/$ and Sony charged $150 per DVD player. Currently the spot exchange rate is ¥110/$ and Sony is charging $170 per DVD player. What is the degree of pass through by Sony of Japan on their DVD players?
    (a) 95.9%
    (b) 86.7%
    (c) 73.3%
    (d) 4.1%

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    Solution Preview

    Q5 (a) Monetary independence and exchange rate stability

    Q6 Last year ...

    Solution Summary

    Answer two MCQs on Multinational Business Finance.