Question 1

The balance of payments is a summary of all transactions between domestic and foreign residents for a specific country over a specified period of time.

Accepted Answer

A) True 
 B)False

Question 2

​The World Bank's Multilateral Investment Guarantee Agency (MIGA):

Accepted Answer

A)  ​offers various forms of export insurance. 
B)  ​offers various forms of import insurance. 
C)  ​offers various forms of exchange rate risk insurance. 
D)  ​provides loans to developing countries. 
E)  ​offers various forms of political risk insurance. 
A)  ​offers various forms of export insurance. 
B)  ​offers various forms of import insurance. 
C)  ​offers various forms of exchange rate risk insurance. 
D)  ​provides loans to developing countries. 
E)  ​offers various forms of political risk insurance.

Question 3

​Intracompany trade makes up more than ____ percent of all international trade.

Accepted Answer

A)  ​50 
B)  ​70 
C)  ​25 
D)  ​13 
E)  ​5 
A)  ​50 
B)  ​70 
C)  ​25 
D)  ​13 
E)  ​5

Question 4

A weakening of the U.S. dollar with respect to the British pound would likely reduce U.S. exports to the United Kingdom and increase U.S. imports from the United Kingdom.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not likely to represent a strategy by the government of Country X to reduce its balance-of-trade deficit with Country Y?

Accepted Answer

A)  The government of Country X eliminates environmental restrictions. 
B)  The government of Country X subsidizes firms in its country to facilitate dumping. 
C)  The government of Country X provides tax breaks to firms in specific industries. 
D)  The government of Country X removes a tariff on goods imported from Country Y. 
A)  The government of Country X eliminates environmental restrictions. 
B)  The government of Country X subsidizes firms in its country to facilitate dumping. 
C)  The government of Country X provides tax breaks to firms in specific industries. 
D)  The government of Country X removes a tariff on goods imported from Country Y.

Question 6

The World Bank extends loans only to developed nations, while the International Development Association (IDA) extends loans only to developing nations.

Accepted Answer

A) True 
 B)False

Question 7

The capital account reflects changes in country ownership of direct foreign investment.

Accepted Answer

A) True 
 B)False

Question 8

The World Bank frequently enters into cofinancing agreements, under which it joins with official aid agencies, export credit agencies, or commercial banks in providing financing.

Accepted Answer

A) True 
 B)False

Question 9

​The International Finance Corporation was established to 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.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

​The "J-curve" effect describes:

Accepted Answer

A)  ​the continuous long-term inverse relationship between a country's current account balance and the country's growth in gross domestic product. 
B)  ​the short-run tendency for a country's balance of trade to deteriorate even while its currency is depreciating. 
C)  ​the tendency for exporters to initially reduce the price of goods when their own currency appreciates. 
D)  ​the tendency of a country's currency to initially depreciate after the country's inflation rate declines.
Answer Key 
A)  ​the continuous long-term inverse relationship between a country's current account balance and the country's growth in gross domestic product. 
B)  ​the short-run tendency for a country's balance of trade to deteriorate even while its currency is depreciating. 
C)  ​the tendency for exporters to initially reduce the price of goods when their own currency appreciates. 
D)  ​the tendency of a country's currency to initially depreciate after the country's inflation rate declines.
Answer Key

Question 12

Intracompany trade is the exporting of products by one country to other countries below cost.

Accepted Answer

A) True 
 B)False

Question 13

If the home currency begins to appreciate against other currencies, this should ____ the current account balance, other things being equal (assume that substitutes are readily available in other countries, and that the prices charged by firms remain the same).

Accepted Answer

A)  increase 
B)  have no impact on 
C)  reduce 
D)  All of these are equally possible. 
A)  increase 
B)  have no impact on 
C)  reduce 
D)  All of these are equally possible.

Question 14

Which of the following is not a result of the North American Free Trade Agreement (NAFTA)?

Accepted Answer

A)  increased trade between the United States and Central American countries 
B)  increased imports by the United States from Mexico 
C)  increased exports by U.S. firms to Mexico 
D)  increased establishment of subsidiaries in Mexico by U.S. firms 
A)  increased trade between the United States and Central American countries 
B)  increased imports by the United States from Mexico 
C)  increased exports by U.S. firms to Mexico 
D)  increased establishment of subsidiaries in Mexico by U.S. firms

Question 15

​Like the International Monetary Fund (IMF), the ____ is composed of a number of nations as members. However, unlike the IMF, it uses the private rather than the government sector to achieve its objectives.

Accepted Answer

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

Question 16

The sale of patent rights by a U.S. firm to a Russian firm reflects a credit to the U.S. balance of payments account.

Accepted Answer

A) True 
 B)False

Question 17

The North American Free Trade Agreement (NAFTA) increased restrictions on:

Accepted Answer

A)  trade between Canada and Mexico. 
B)  trade between Canada and the United States 
C)  direct foreign investment in Mexico by U.S. firms. 
D)  None of these are correct. 
A)  trade between Canada and Mexico. 
B)  trade between Canada and the United States 
C)  direct foreign investment in Mexico by U.S. firms. 
D)  None of these are correct.

Question 18

​The ____ is the difference between exports and imports.

Accepted Answer

A)  ​balance of trade 
B)  ​balance on goods and services 
C)  ​balance of payments 
D)  ​current account 
E)  ​capital account 
A)  ​balance of trade 
B)  ​balance on goods and services 
C)  ​balance of payments 
D)  ​current account 
E)  ​capital account

Question 19

​Without international capital flows, there would be ____ funding available in the United States across all risk levels, and the cost of funding would be ____ regardless of the firm's risk level.

Accepted Answer

A)  ​more; lower 
B)  ​more; higher 
C)  ​less; lower 
D)  ​less; higher 
A)  ​more; lower 
B)  ​more; higher 
C)  ​less; lower 
D)  ​less; higher

Question 20

​According to the text, international trade (exports plus imports combined) as a percentage of GDP is:

Accepted Answer

A)  ​higher in the United States than in European countries. 
B)  ​lower in the United States than in European countries. 
C)  ​higher in the United States than in about half the European countries, and lower in the United States than in the others. 
D)  ​about the same in the United States as in European countries. 
A)  ​higher in the United States than in European countries. 
B)  ​lower in the United States than in European countries. 
C)  ​higher in the United States than in about half the European countries, and lower in the United States than in the others. 
D)  ​about the same in the United States as in European countries.

Exam 2: International Flow of Funds

The balance of payments is a summary of all transactions between domestic and foreign residents for a specific country over a specified period of time.

​The World Bank's Multilateral Investment Guarantee Agency (MIGA):

​Intracompany trade makes up more than ____ percent of all international trade.

A weakening of the U.S. dollar with respect to the British pound would likely reduce U.S. exports to the United Kingdom and increase U.S. imports from the United Kingdom.

Which of the following is not likely to represent a strategy by the government of Country X to reduce its balance-of-trade deficit with Country Y?

The World Bank extends loans only to developed nations, while the International Development Association (IDA) extends loans only to developing nations.

The capital account reflects changes in country ownership of direct foreign investment.

The World Bank frequently enters into cofinancing agreements, under which it joins with official aid agencies, export credit agencies, or commercial banks in providing financing.

​The International Finance Corporation was established to promote economic development:

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

​The "J-curve" effect describes:

Intracompany trade is the exporting of products by one country to other countries below cost.

If the home currency begins to appreciate against other currencies, this should ____ the current account balance, other things being equal (assume that substitutes are readily available in other countries, and that the prices charged by firms remain the same).

Which of the following is not a result of the North American Free Trade Agreement (NAFTA)?

​Like the International Monetary Fund (IMF), the ____ is composed of a number of nations as members. However, unlike the IMF, it uses the private rather than the government sector to achieve its objectives.

The sale of patent rights by a U.S. firm to a Russian firm reflects a credit to the U.S. balance of payments account.

The North American Free Trade Agreement (NAFTA) increased restrictions on:

​The ____ is the difference between exports and imports.

​Without international capital flows, there would be ____ funding available in the United States across all risk levels, and the cost of funding would be ____ regardless of the firm's risk level.

​According to the text, international trade (exports plus imports combined) as a percentage of GDP is:

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's Multilateral Investment Guarantee Agency (MIGA):

Intracompany trade makes up more than ____ percent of all international trade.

The International Finance Corporation was established to promote economic development:

The "J-curve" effect describes:

Like the International Monetary Fund (IMF), the ____ is composed of a number of nations as members. However, unlike the IMF, it uses the private rather than the government sector to achieve its objectives.

The ____ is the difference between exports and imports.

Without international capital flows, there would be funding available in the United States across all risk levels, and the cost of funding would be regardless of the firm's risk level.

According to the text, international trade (exports plus imports combined) as a percentage of GDP is: