Question 1

The ________ of the balance of payments measures all international economic transactions of financial assets.

Accepted Answer

A)  current account 
B)  merchandise trade account 
C)  services account 
D)  capital/financial account 
A)  current account 
B)  merchandise trade account 
C)  services account 
D)  capital/financial account

Question 2

Which of the following would NOT be considered a typical BOP transaction?

Accepted Answer

A)  Toyota U.S.A. is a U.S. distributor of automobiles manufactured in Japan by its parent company. 
B)  The U.S. subsidiary of European financial giant, Credit Suisse, pays dividends to its parent in Zurich. 
C)  A U.S. tourist purchases gifts at a museum in London. 
D)  All are example of BOP transactions. 
A)  Toyota U.S.A. is a U.S. distributor of automobiles manufactured in Japan by its parent company. 
B)  The U.S. subsidiary of European financial giant, Credit Suisse, pays dividends to its parent in Zurich. 
C)  A U.S. tourist purchases gifts at a museum in London. 
D)  All are example of BOP transactions.

Question 3

The time from 1971 to today has predominately used a regime of variable exchange rates. It has also seen a decrease in capital mobility.

Accepted Answer

A) True 
 B)False

Question 4

The era between 1880 and 1914, when the gold standard was in use, was characterized by increasing capital mobility.

Accepted Answer

A) True 
 B)False

Question 5

The two major concerns about foreign direct investment are

Accepted Answer

A)  national defense and taxes. 
B)  who controls the assets and who receives the profits. 
C)  who receives the profits and taxes. 
D)  who pays the taxes and who receives the taxes. 
A)  national defense and taxes. 
B)  who controls the assets and who receives the profits. 
C)  who receives the profits and taxes. 
D)  who pays the taxes and who receives the taxes.

Question 6

Most U.S. debt purchased by foreigners is denominated in ________ and most foreign debt issued by countries such as Russia, Mexico, and Brazil is issued in ________.

Accepted Answer

A)  U.S. dollars; the purchasing investor's domestic currency 
B)  the purchasing investor's domestic currency; the issuing country's domestic currency 
C)  U.S. dollars; the issuing country's domestic currency 
D)  U.S. dollars; U.S. dollars 
A)  U.S. dollars; the purchasing investor's domestic currency 
B)  the purchasing investor's domestic currency; the issuing country's domestic currency 
C)  U.S. dollars; the issuing country's domestic currency 
D)  U.S. dollars; U.S. dollars

Question 7

The immediate impact on the balance of trade (BOT) for a country in deficit when there is an immediate devaluation of it's currency is likely to be an even larger BOT deficit than prior to devaluation.

Accepted Answer

A) True 
 B)False

Question 8

The beauty of the J-curve adjustment path for trade balance adjustments is that the process is very quick, typically taking only a month or so to complete.

Accepted Answer

A) True 
 B)False

Question 9

The ________ includes all international economic transactions with income or payment flows occurring within the year.

Accepted Answer

A)  capital account 
B)  current account 
C)  financial account 
D)  IMF account 
A)  capital account 
B)  current account 
C)  financial account 
D)  IMF account

Question 10

International debt security purchases and sales are defined as portfolio investments for financial account purposes because by definition debt securities do not provide the buyer with ownership or control.

Accepted Answer

A) True 
 B)False

Question 11

The authors identify a tip for understanding BOP accounting. They recommend that you "follow the cash flow."

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is the best definition of money laundering?

Accepted Answer

A)  legal transfer of funds through the usual international payments mechanisms 
B)  the transfer of cash into collectibles that are then transferred across borders 
C)  the cross-border purchase of assets that are then managed in a way that hide the movement of money and its ownership 
D)  False invoicing of international trade transactions 
A)  legal transfer of funds through the usual international payments mechanisms 
B)  the transfer of cash into collectibles that are then transferred across borders 
C)  the cross-border purchase of assets that are then managed in a way that hide the movement of money and its ownership 
D)  False invoicing of international trade transactions

Question 13

Which of the following is NOT part of the balance of payments account?

Accepted Answer

A)  the current account 
B)  the financial/capital account 
C)  the official reserves account 
D)  All of the above are BOP accounts. 
A)  the current account 
B)  the financial/capital account 
C)  the official reserves account 
D)  All of the above are BOP accounts.

Question 14

Portfolio investments are transactions that involve long-term financial assets and affect the transfer of control.

Accepted Answer

A) True 
 B)False

Question 15

What is a country's balance of (merchandise) trade and why is it so widely reported in the financial and popular press?

Accepted Answer

The balance of trade (BOT) is the larges

Question 16

Over the last two decades the surplus on U.S. services trade has typically been ________ the deficit on U.S. goods trade.

Accepted Answer

A)  greater than 
B)  equal to 
C)  less than 
D)  The relationship is constantly shifting from greater than to less than. 
A)  greater than 
B)  equal to 
C)  less than 
D)  The relationship is constantly shifting from greater than to less than.

Question 17

The balance of payments is most like a(an) ________.

Accepted Answer

A)  cash flow statement 
B)  balance sheet 
C)  income statement 
D)  proxy statement 
A)  cash flow statement 
B)  balance sheet 
C)  income statement 
D)  proxy statement

Question 18

In general there is consensus that ________ should be free but there is no such consensus that ________ should be free.

Accepted Answer

A)  international investment; international goods trade 
B)  international investment; international trade 
C)  international trade; international goods trade 
D)  international trade; international investment 
A)  international investment; international goods trade 
B)  international investment; international trade 
C)  international trade; international goods trade 
D)  international trade; international investment

Question 19

Which of the following statements about the balance of payments is not true?

Accepted Answer

A)  The BOP is the summary statement of all international transactions between one country and all other countries. 
B)  The BOP is a flow statement, summarizing all international transactions that occur across the geographic borders over a period of time, typically a year. 
C)  Although the BOP must always balance in theory, in practice there are substantial imbalances as a result of statistical errors and misreporting of current account and financial account flows. 
D)  All of the above are true. 
A)  The BOP is the summary statement of all international transactions between one country and all other countries. 
B)  The BOP is a flow statement, summarizing all international transactions that occur across the geographic borders over a period of time, typically a year. 
C)  Although the BOP must always balance in theory, in practice there are substantial imbalances as a result of statistical errors and misreporting of current account and financial account flows. 
D)  All of the above are true.

Question 20

The balance of payments as applied to a course in international finance may be defined as

Accepted Answer

A)  the amount still owed by an exporting firm after making an initial down payment. 
B)  the amount still owed by governments to the International Monetary Fund. 
C)  the measurement of all international economic transactions between the residents of a country and foreign residents. 
D)  the amount of a country's merchandise trade deficit or surplus. 
A)  the amount still owed by an exporting firm after making an initial down payment. 
B)  the amount still owed by governments to the International Monetary Fund. 
C)  the measurement of all international economic transactions between the residents of a country and foreign residents. 
D)  the amount of a country's merchandise trade deficit or surplus.

Exam 4: The Balance of Payments

The ________ of the balance of payments measures all international economic transactions of financial assets.

Which of the following would NOT be considered a typical BOP transaction?

The time from 1971 to today has predominately used a regime of variable exchange rates. It has also seen a decrease in capital mobility.

The era between 1880 and 1914, when the gold standard was in use, was characterized by increasing capital mobility.

The two major concerns about foreign direct investment are

Most U.S. debt purchased by foreigners is denominated in ________ and most foreign debt issued by countries such as Russia, Mexico, and Brazil is issued in ________.

The immediate impact on the balance of trade (BOT) for a country in deficit when there is an immediate devaluation of it's currency is likely to be an even larger BOT deficit than prior to devaluation.

The beauty of the J-curve adjustment path for trade balance adjustments is that the process is very quick, typically taking only a month or so to complete.

The ________ includes all international economic transactions with income or payment flows occurring within the year.

International debt security purchases and sales are defined as portfolio investments for financial account purposes because by definition debt securities do not provide the buyer with ownership or control.

The authors identify a tip for understanding BOP accounting. They recommend that you "follow the cash flow."

Which of the following is the best definition of money laundering?

Which of the following is NOT part of the balance of payments account?

Portfolio investments are transactions that involve long-term financial assets and affect the transfer of control.

What is a country's balance of (merchandise) trade and why is it so widely reported in the financial and popular press?

Over the last two decades the surplus on U.S. services trade has typically been ________ the deficit on U.S. goods trade.

The balance of payments is most like a(an) ________.

In general there is consensus that ________ should be free but there is no such consensus that ________ should be free.

Which of the following statements about the balance of payments is not true?

The balance of payments as applied to a course in international finance may be defined as

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Foreign Exchange Market

International Parity Conditions

Foreign Exchange Rate Determination and Forecasting

Foreign Currency Derivatives

Transaction Exposure

Operating Exposure

Translation Exposure

Global Cost and Availability of Capital

Sourcing Equity Capital Globally

Financial Structure and International Debt

Interest Rate and Currency Swaps

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Strategy

Political Risk Assessment and Management

Multinational Capital Budgeting

International Trade Finance

Multinational Tax Management

Working Capital Management

Filters

Most U.S. debt purchased by foreigners is denominated in and most foreign debt issued by countries such as Russia, Mexico, and Brazil is issued in .

In general there is consensus that should be free but there is no such consensus that should be free.