Question 1

What are official reserve assets,and why are they important to countries?

Accepted Answer

Reserve assets are mainly the currencies of the largest and most stable economies in the world: U.S.dollars,European Union (EU)euros,British pounds,the Japanese yen,and recently the Chinese yuan,as well as monetary gold and SDRs.All forms of international debts can be settled with reserve assets.When a country runs low on reserve assets,it signals that potentially serious problems are arising.In particular,the country may not be able to pay international debts,and it may harm import businesses if the central bank cannot provide a key currency required for payment of import goods.

Question 2

All financial account transactions are linked to current account transactions,since the current and financial accounts are mirror images of each other.

Accepted Answer

A) True 
 B)False  False

Question 3

An example of odious debt would be debts on the part of a nation that were incurred by a dictator for the well-being of his family.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following is an example of direct foreign investment?

Accepted Answer

A) A U.S. citizen buys stock in a Mexican company. 
B) The Bank of China buys U.S. Treasury bonds. 
C) Apple builds a plant in Ireland. 
D) A company in England buys inputs to production from a German company. 
A) A U.S. citizen buys stock in a Mexican company. 
B) The Bank of China buys U.S. Treasury bonds. 
C) Apple builds a plant in Ireland. 
D) A company in England buys inputs to production from a German company.

Question 5

The U.S.current account deficit improved slightly from 2007 to 2010 because

Accepted Answer

A) spending on imports fell due to an overall fall in consumption. 
B) state, local, and federal government budget deficits increased. 
C) worldwide economic growth spurred U.S. exports. 
D) capital controls restricted capital inflow. 
A) spending on imports fell due to an overall fall in consumption. 
B) state, local, and federal government budget deficits increased. 
C) worldwide economic growth spurred U.S. exports. 
D) capital controls restricted capital inflow.

Question 6

Describe how a sudden stop leads to a financial crisis.

Accepted Answer

A sudden shift from positive to negative

Question 7

There are debt relief programs currently available for highly indebted poor countries.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is an example of foreign direct investment?

Accepted Answer

A) Toyota builds an automobile plant in Ohio. 
B) The Bank of Japan buys dollars. 
C) A citizen of Japan buys stock in Microsoft. 
D) A citizen of Japan buys a U.S. government bond. 
A) Toyota builds an automobile plant in Ohio. 
B) The Bank of Japan buys dollars. 
C) A citizen of Japan buys stock in Microsoft. 
D) A citizen of Japan buys a U.S. government bond.

Question 9

If the trade balance is negative,the current account balance will be negative.

Accepted Answer

A) True 
 B)False

Question 10

A sudden stop will be easier to navigate if the country borrows internationally in foreign currencies and lend locally in its domestic currency.

Accepted Answer

A) True 
 B)False

Question 11

The free movement of financial capital is desirable for all countries.

Accepted Answer

A) True 
 B)False

Question 12

It is unclear whether the free flow of capital is beneficial to all countries.Explain the benefits and costs of allowing capital to move freely.

Accepted Answer

On the one hand,foreign capital inflows

Question 13

How do recent current account deficits compare to GNP and to past ratios?

Accepted Answer

It is over 6 percent of GNP,mu

Question 14

Which of the following transactions would be recorded in the capital account?

Accepted Answer

A) U)S. investors purchase bonds from Germany. 
B) The Fed increases its holdings of yen. 
C) The U.S. transfers a military base to another country. 
D) A U.S. firm sells a machine to a business in another country. 
A) U)S. investors purchase bonds from Germany. 
B) The Fed increases its holdings of yen. 
C) The U.S. transfers a military base to another country. 
D) A U.S. firm sells a machine to a business in another country.

Question 15

Based on Table 9.2,the current account balance is

Accepted Answer

A) -2 percent of GNP. 
B) +2 percent of GNP. 
C) +4 percent of GNP. 
D) -4 percent of GNP. 
A) -2 percent of GNP. 
B) +2 percent of GNP. 
C) +4 percent of GNP. 
D) -4 percent of GNP.

Question 16

Use the following table to answer the next question. All values are net.Table 9.3
  
-Based on Table 9.3,the capital account balance is equal to

Accepted Answer

A) +25. 
B) -25. 
C) -125. 
D) +125. 
A) +25. 
B) -25. 
C) -125. 
D) +125.

Question 17

Which of the following transactions would be recorded as a CREDIT in the current account?

Accepted Answer

A) A U.S. citizen purchases goods from Ireland. 
B) A U.S. company pays dividends on its stock. Some of the dividends go to foreign owners of the stock. 
C) The U.S. sells wheat to Mexico. 
D) A person living in the United States sends money home to her family in Cuba. 
A) A U.S. citizen purchases goods from Ireland. 
B) A U.S. company pays dividends on its stock. Some of the dividends go to foreign owners of the stock. 
C) The U.S. sells wheat to Mexico. 
D) A person living in the United States sends money home to her family in Cuba.

Question 18

What is odious debt,and how is the Democratic Republic of the Congo (DRC)an example of this?

Accepted Answer

Odious debt is legally defined as debt i

Question 19

Direct foreign investment items have more liquidity than foreign portfolio investment items.

Accepted Answer

A) True 
 B)False

Question 20

Negative current account balances are usually associated with

Accepted Answer

A) a shrinking of the international investment position. 
B) an improvement of the international investment position. 
C) a decrease in external debt. 
D) an increase in external debt. 
A) a shrinking of the international investment position. 
B) an improvement of the international investment position. 
C) a decrease in external debt. 
D) an increase in external debt.

What are official reserve assets,and why are they important to countries?

All financial account transactions are linked to current account transactions,since the current and financial accounts are mirror images of each other.

An example of odious debt would be debts on the part of a nation that were incurred by a dictator for the well-being of his family.

Which of the following is an example of direct foreign investment?

The U.S.current account deficit improved slightly from 2007 to 2010 because

Describe how a sudden stop leads to a financial crisis.

There are debt relief programs currently available for highly indebted poor countries.

Which of the following is an example of foreign direct investment?

If the trade balance is negative,the current account balance will be negative.

A sudden stop will be easier to navigate if the country borrows internationally in foreign currencies and lend locally in its domestic currency.

The free movement of financial capital is desirable for all countries.

It is unclear whether the free flow of capital is beneficial to all countries.Explain the benefits and costs of allowing capital to move freely.

How do recent current account deficits compare to GNP and to past ratios?

Which of the following transactions would be recorded in the capital account?

Based on Table 9.2,the current account balance is

Use the following table to answer the next question. All values are net.Table 9.3 -Based on Table 9.3,the capital account balance is equal to

Which of the following transactions would be recorded as a CREDIT in the current account?

What is odious debt,and how is the Democratic Republic of the Congo (DRC)an example of this?

Direct foreign investment items have more liquidity than foreign portfolio investment items.

Negative current account balances are usually associated with

The United States in a Global Economy

International Economic Institutions Since World War II

Comparative Advantage and the Gains From Trade

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Exchange Rates and Exchange Rate Systems

An Introduction to Open Economy Macroeconomics

International Financial Crises

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

China and India in the World Economy

Filters

Exam 9: Trade and the Balance of Payments

What are official reserve assets,and why are they important to countries?

All financial account transactions are linked to current account transactions,since the current and financial accounts are mirror images of each other.

An example of odious debt would be debts on the part of a nation that were incurred by a dictator for the well-being of his family.

Which of the following is an example of direct foreign investment?

The U.S.current account deficit improved slightly from 2007 to 2010 because

Describe how a sudden stop leads to a financial crisis.

There are debt relief programs currently available for highly indebted poor countries.

Which of the following is an example of foreign direct investment?

If the trade balance is negative,the current account balance will be negative.

A sudden stop will be easier to navigate if the country borrows internationally in foreign currencies and lend locally in its domestic currency.

The free movement of financial capital is desirable for all countries.

It is unclear whether the free flow of capital is beneficial to all countries.Explain the benefits and costs of allowing capital to move freely.

How do recent current account deficits compare to GNP and to past ratios?

Which of the following transactions would be recorded in the capital account?

Based on Table 9.2,the current account balance is

Use the following table to answer the next question. All values are net.Table 9.3 -Based on Table 9.3,the capital account balance is equal to

Which of the following transactions would be recorded as a CREDIT in the current account?

What is odious debt,and how is the Democratic Republic of the Congo (DRC)an example of this?

Direct foreign investment items have more liquidity than foreign portfolio investment items.

Negative current account balances are usually associated with

The United States in a Global Economy

International Economic Institutions Since World War II

Comparative Advantage and the Gains From Trade

Comparative Advantage and Factor Endowments

Beyond Comparative Advantage

The Theory of Tariffs and Quotas

Commercial Policy

International Trade and Labor and Environmental Standards

Exchange Rates and Exchange Rate Systems

An Introduction to Open Economy Macroeconomics

International Financial Crises

The United States in the World Economy

The European Union: Many Markets Into One

Trade and Policy Reform in Latin America

Export-Oriented Growth in East Asia

China and India in the World Economy

Filters