Exam 6: International Finance and Trade

The capital account balance includes all foreign private and government investment in the United States netted against U.S. investments in foreign countries.

All of the following affect the balance of the capital account except

Interest rate parity states that a country with a relatively higher expected inflation rate will have its currency depreciate relative to a country with a relatively lower inflation rate.

The current account balance shows the flow of income into and out of the United States during a specified time period.

Holding demand constant, a decrease in supply for one currency relative to another will cause its value to depreciate relative to that currency.

Which of the following statements is most correct?

A draft requiring immediate payment is called a(n)

Beginning in March 1973, major currencies were allowed to "float" against one another.

A promise of future payment issued by a firm guaranteed by a bank is called a(n)

Holding demand constant, an increase in supply for one currency relative to another will cause its value to depreciate relative to that currency.

An order bill of lading is a document given by a transportation company that lists goods to be transported and terms of the shipping agreement.

It is a system in which individual currencies would be tied to gold through the U.S. dollar via fixed, or pegged, exchange rates.

The currency quotation method that indicates the amount of a home country's currency needed to purchase one unit of a foreign currency is called the

A draft that is not accompanied by any special documents and generally used when the exporter has confidence in the importer's ability to meet the draft when presented is known as

The Board of Governors of the Federal Reserve System authorizes member banks to accept drafts that arise in the course of certain types of international transactions.

A clean draft is accompanied by an order bill of lading along with other papers such as insurance receipts, certificates of sanitation, and consular invoices.

Prior to the start of World War I in 1914, the international monetary system operated mostly under a silver standard.

The direct quotation method indicates the amount of a foreign currency necessary to purchase one unit of the home country's currency.

A time draft must be paid quicker than a sight draft.

A nation with a relatively lower inflation rate than other countries will have a relatively stronger currency holding other factors constant.