Question 1

​The World Bank was established to reduce poverty and promote economic development:

Accepted Answer

A)  ​in Asia through grants to businesses. 
B)  ​by providing nonsubsidized loans (at market interest rates) to governments and their agencies. 
C)  ​by providing low-interest-rate loans (below-market rates) to poor nations. 
D)  ​through the private sector by providing loans to corporations and investing in their stock. 
A)  ​in Asia through grants to businesses. 
B)  ​by providing nonsubsidized loans (at market interest rates) to governments and their agencies. 
C)  ​by providing low-interest-rate loans (below-market rates) to poor nations. 
D)  ​through the private sector by providing loans to corporations and investing in their stock. B

Question 2

The demand for U.S. exports tends to increase when:

Accepted Answer

A)  economic growth in foreign countries decreases. 
B)  the currencies of foreign countries strengthen against the dollar. 
C)  U.S. inflation rises. 
D)  None of these are correct. 
A)  economic growth in foreign countries decreases. 
B)  the currencies of foreign countries strengthen against the dollar. 
C)  U.S. inflation rises. 
D)  None of these are correct. B

Question 3

​In recent years, the United States has had a relatively (compared to other countries) ____ balance of trade ____ with China.

Accepted Answer

A)  ​small; surplus 
B)  ​large; surplus 
C)  ​small; deficit 
D)  ​large; deficit 
A)  ​small; surplus 
B)  ​large; surplus 
C)  ​small; deficit 
D)  ​large; deficit D

Question 4

Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) between countries that do not affect the transfer of control.

Accepted Answer

A) True 
 B)False

Question 5

Regarding the U.S. balance of payments, capital account items are relatively minor compared to the financial account items.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following will probably not result in an increase in a country's current account balance (assuming everything else remains constant)?

Accepted Answer

A)  a decrease in the country's rate of inflation 
B)  a decrease in the country's national income level 
C)  an increase in government restrictions in the form of tariffs or quotas 
D)  an appreciation of the country's currency 
E)  All of these will result in an increased current account balance. 
A)  a decrease in the country's rate of inflation 
B)  a decrease in the country's national income level 
C)  an increase in government restrictions in the form of tariffs or quotas 
D)  an appreciation of the country's currency 
E)  All of these will result in an increased current account balance.

Question 7

A U.S. purchase of patent rights from a firm in Mexico reflects a credit to the U.S. balance of payments account.

Accepted Answer

A) True 
 B)False

Question 8

The World Trade Organization was established to provide a forum for multilateral trade negotiations and to settle trade disputes.

Accepted Answer

A) True 
 B)False

Question 9

Assume that some U.S. firms will purchase supplies from either China or from U.S. firms. If the Chinese yuan appreciates against the dollar, that should reduce the U.S. balance-of-trade deficit with China.

Accepted Answer

A) True 
 B)False

Question 10

​A country's net outflow of funds ____ its interest rates, and ____ its economic conditions.

Accepted Answer

A)  ​affects; affects 
B)  ​affects; does not affect 
C)  ​does not affect; does not affect 
D)  ​does not affect; affects 
A)  ​affects; affects 
B)  ​affects; does not affect 
C)  ​does not affect; does not affect 
D)  ​does not affect; affects

Question 11

Which of the following would likely have the least direct influence on a country's current account?

Accepted Answer

A)  ​inflation 
B)  ​national income 
C)  ​exchange rates 
D)  ​tariffs 
E)  ​a tax on income earned from foreign stocks 
A)  ​inflation 
B)  ​national income 
C)  ​exchange rates 
D)  ​tariffs 
E)  ​a tax on income earned from foreign stocks

Question 12

​An increase in the use of quotas is expected to:

Accepted Answer

A)  ​reduce the country's current account balance, if other governments do not retaliate. 
B)  ​increase the country's current account balance, if other governments do not retaliate. 
C)  ​have no impact on the country's current account balance unless other governments retaliate. 
D)  ​increase the volume of a country's trade with other countries. 
A)  ​reduce the country's current account balance, if other governments do not retaliate. 
B)  ​increase the country's current account balance, if other governments do not retaliate. 
C)  ​have no impact on the country's current account balance unless other governments retaliate. 
D)  ​increase the volume of a country's trade with other countries.

Question 13

Which of the following is mentioned in the text as a possible means by which the government may attempt to improve its balance-of-trade position (increase its exports or reduce its imports)?

Accepted Answer

A)  The government could attempt to reduce its home currency's value. 
B)  The government could require firms to engage in outsourcing. 
C)  The government could provide subsidies to importers. 
D)  All of these are mentioned. 
A)  The government could attempt to reduce its home currency's value. 
B)  The government could require firms to engage in outsourcing. 
C)  The government could provide subsidies to importers. 
D)  All of these are mentioned.

Question 14

​Also known as the "central banks' central bank," the ____ attempts to facilitate cooperation among countries with regard to international transactions.

Accepted Answer

A)  ​World Bank 
B)  ​International Finance Corporation (IF
C)  
C)  ​World Trade Organization 
D)  ​International Development Association (ID
A)  
E)  ​Bank for International Settlements (BIS) 
A)  ​World Bank 
B)  ​International Finance Corporation (IF
C)  
C)  ​World Trade Organization 
D)  ​International Development Association (ID
A)  
E)  ​Bank for International Settlements (BIS)

Question 15

A balance-of-trade surplus indicates an excess of merchandise imports over merchandise exports.

Accepted Answer

A) True 
 B)False

Question 16

The primary component of the capital account is the balance of trade.

Accepted Answer

A) True 
 B)False

Question 17

____ represents aid, grants, and gifts from one country to another.

Accepted Answer

A)  ​Secondary income 
B)  ​Primary income 
C)  ​The balance of trade 
D)  ​The balance of payments 
E)  ​The capital account 
A)  ​Secondary income 
B)  ​Primary income 
C)  ​The balance of trade 
D)  ​The balance of payments 
E)  ​The capital account

Question 18

​A weak home currency may not be a perfect solution to correct a balance-of-trade deficit because:

Accepted Answer

A)  ​it reduces the prices of imports paid by local companies. 
B)  ​it increases the prices of exports by local companies. 
C)  ​it prevents international trade transactions from being prearranged. 
D)  ​foreign companies may reduce the prices of their products to stay competitive. 
A)  ​it reduces the prices of imports paid by local companies. 
B)  ​it increases the prices of exports by local companies. 
C)  ​it prevents international trade transactions from being prearranged. 
D)  ​foreign companies may reduce the prices of their products to stay competitive.

Question 19

​The primary component of the current account is the:

Accepted Answer

A)  ​balance of trade. 
B)  ​balance of gifts. 
C)  ​balance of aid payments. 
D)  ​balance of grant payments. 
A)  ​balance of trade. 
B)  ​balance of gifts. 
C)  ​balance of aid payments. 
D)  ​balance of grant payments.

Question 20

Direct foreign investment by U.S.-based MNCs occurs primarily in the Bahamas and Brazil.

Accepted Answer

A) True 
 B)False

Exam 2: International Flow of Funds

​The World Bank was established to reduce poverty and promote economic development:

The demand for U.S. exports tends to increase when:

​In recent years, the United States has had a relatively (compared to other countries) ____ balance of trade ____ with China.

Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) between countries that do not affect the transfer of control.

Regarding the U.S. balance of payments, capital account items are relatively minor compared to the financial account items.

Which of the following will probably not result in an increase in a country's current account balance (assuming everything else remains constant)?

A U.S. purchase of patent rights from a firm in Mexico reflects a credit to the U.S. balance of payments account.

The World Trade Organization was established to provide a forum for multilateral trade negotiations and to settle trade disputes.

Assume that some U.S. firms will purchase supplies from either China or from U.S. firms. If the Chinese yuan appreciates against the dollar, that should reduce the U.S. balance-of-trade deficit with China.

​A country's net outflow of funds ____ its interest rates, and ____ its economic conditions.

Which of the following would likely have the least direct influence on a country's current account?

​An increase in the use of quotas is expected to:

Which of the following is mentioned in the text as a possible means by which the government may attempt to improve its balance-of-trade position (increase its exports or reduce its imports)?

​Also known as the "central banks' central bank," the ____ attempts to facilitate cooperation among countries with regard to international transactions.

A balance-of-trade surplus indicates an excess of merchandise imports over merchandise exports.

The primary component of the capital account is the balance of trade.

____ represents aid, grants, and gifts from one country to another.

​A weak home currency may not be a perfect solution to correct a balance-of-trade deficit because:

​The primary component of the current account is the:

Direct foreign investment by U.S.-based MNCs occurs primarily in the Bahamas and Brazil.

Multinational Financial Management: an Overview

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships Among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Capital Structure and Cost of Capital

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

The World Bank was established to reduce poverty and promote economic development:

In recent years, the United States has had a relatively (compared to other countries) balance of trade with China.

A country's net outflow of funds its interest rates, and its economic conditions.

An increase in the use of quotas is expected to:

Also known as the "central banks' central bank," the ____ attempts to facilitate cooperation among countries with regard to international transactions.

A weak home currency may not be a perfect solution to correct a balance-of-trade deficit because:

The primary component of the current account is the: