1,

Sometimes it is claimed that the international equality of real interest rates is the most accurate barometer of international financial integration. Do you agree? Why or why not?

A.

Yes, the equality of real interest rates implies that international capital movement is truly efficient to have the same return in all countries.

B.

Yes, the equality of real interest rates implies that there are no differences between countries' productivity or trends in world demand which leads to expected changes in the real exchange rate over time.

C.

No, there is a real interest parity condition that says the home real interest could differ from the foreign by the expected percentage change in the real exchange rate.

D.

No, there is an interest parity condition that says the home interest could differ from the foreign by the expected percentage change in the exchange rate.

2,

When a U.S. bank accepts a deposit from one of its foreign branches, that deposit is subject to Fed reserve requirements. Similarly, reserve requirements are imposed on any loan from a U.S. bank's foreign branch to a U.S. resident, or on any asset purchase by the branch bank from its U.S. parent.

The rationale for these regulations is that

A.

U.S. banks without foreign branches have more options than those without foreign branches.

B.

all U.S. banks are subject to the same reserve requirement that is important for bank solvency.

C.

foreign banks and their branches in U.S. do not have an unfair advantage.

D.

foreign banks and U.S. banks have a "level playing field."