Question

True/False

1. Exposure illustrates the problem of inefficiency.
2. Exposure can be defined in three parts: Equilibrium, Expectation and Cash.
3. Economic Exposure is another term for International Exposure.

Answer 1

Exposure in international economics is related to currency risk and does not inherently illustrate inefficiency. The three parts of exposure typically refer to transaction, economic, and translation exposure, not equilibrium, expectation, and cash. Economic Exposure is different from International Exposure, with the former being more specific to currency risk impacts on a company's operations.

Step-by-step explanation:

Regarding the True/False statements provided:

1. Exposure, within the context of international economics, does not necessarily illustrate the problem of inefficiency. Instead, exposure often refers to the degree to which a company or an economy is affected by fluctuations in exchange rates. Efficiency issues can arise from numerous factors, not solely from exposure to currency risks.
2. The definition of exposure can indeed be in three parts, but it commonly includes Transaction Exposure, Economic Exposure, and Translation Exposure rather than 'Equilibrium, Expectation and Cash.'
3. Economic Exposure, also called operating exposure, is not the same as International Exposure. International Exposure is a broader term that may include various types of risks faced by companies operating in international environments.

In the context of international trade and finance, adjustment in exchange rates can affect the competitiveness of a country's exports and imports, influencing the balance of trade and the flow of capital.