Exam 2: International Flow of Funds

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.

The United States typically has a balance-of-trade surplus in its trade with ____.

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

The International Finance Corporation was established to promote economic development:

As a result of the European Union, restrictions on exports between ____ were reduced or eliminated.

____ purchases more U.S. exports than the other countries listed here.

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

A tariff is a maximum limit on imports.

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

The J-curve effect is the initial worsening of the U.S. trade balance due to a weakening dollar because of established trade relationships that are not easily changed; as the dollar weakens, the dollar value of imports initially rises before the U.S. trade balance is improved.

The direct foreign investment positions by U.S. firms have generally ____ over time. Restrictions by governments on direct foreign investment have generally ___ over time.

The ____ is the difference between exports and imports.

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.

Outsourcing allows some MNCs to reduce costs but shifts jobs to other countries.

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.

An American tourist visiting Germany and spending money there (for lodging, food, etc.) will reduce the U.S. current account deficit and reduce Germany's current account balance.

Which of the following is a key component that determines a country's primary income (within the country's current account)?

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

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

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