Question 1

BMW,a German car manufacturer,opens a new subsidiary in China.This transaction will be recorded in China's balance of payments as

Accepted Answer

A)  a credit in the current account 
B)  a debit in the current account 
C)  a credit in the capital account 
D)  a debit in the capital account 
A)  a credit in the current account 
B)  a debit in the current account 
C)  a credit in the capital account 
D)  a debit in the capital account C

Question 2

Foreign direct investment (FDI)occurs:

Accepted Answer

A)  when an investor acquires a measure of control of a foreign business 
B)  when an investor buys foreign bonds directly 
C)  with sales and purchases of foreign stocks and bonds that do not involve a transfer of control 
D)  when a company buys foreign government bonds directly 
A)  when an investor acquires a measure of control of a foreign business 
B)  when an investor buys foreign bonds directly 
C)  with sales and purchases of foreign stocks and bonds that do not involve a transfer of control 
D)  when a company buys foreign government bonds directly A

Question 3

Assume that the balance-of-payments accounts for a country are recorded correctly. The results are:
balance on the current account = BCA = $130 billion
balance on the capital account = BKA = -$86 billion
balance on the reserves account = BRA = ?
-The balance on the reserves account (BRA),under the pure flexible exchange regime is:

Accepted Answer

A)  -$44 billion 
B)  $44 billion 
C)  $216 billion 
D)  BRA will not be considered. 
A)  -$44 billion 
B)  $44 billion 
C)  $216 billion 
D)  BRA will not be considered. D

Question 4

PetroCanada exports oil to New York.This transaction will be recorded in the balance of payments as

Accepted Answer

A)  a credit in the current account 
B)  a debit in the current account 
C)  a credit in the capital account 
D)  a debit in the capital account 
A)  a credit in the current account 
B)  a debit in the current account 
C)  a credit in the capital account 
D)  a debit in the capital account

Question 5

Which of the following is true about Canada's BCA in 2000-2005?

Accepted Answer

A)  Canada had positive BCA 
B)  Canada had negative BCA 
C)  Canada's BCA was increasing during that period 
D)  Canada's BCA was decreasing during that period 
A)  Canada had positive BCA 
B)  Canada had negative BCA 
C)  Canada's BCA was increasing during that period 
D)  Canada's BCA was decreasing during that period

Question 6

If a country has a flexible exchange rate system and a deficit on capital account

Accepted Answer

A)  the balance of payments must be negative. 
B)  The balance of payments must be positive. 
C)  The balance on current account must be positive. 
D)  The balance on current account must be negative. 
A)  the balance of payments must be negative. 
B)  The balance of payments must be positive. 
C)  The balance on current account must be positive. 
D)  The balance on current account must be negative.

Question 7

Portfolio investment refers to:

Accepted Answer

A)  changes in Canadian holdings of noncontrolling equity in foreign companies 
B)  changes in Canadian holdings of controlling equity in foreign companies 
C)  changes in foreign holdings of controlling equity in Canadian companies 
D)  changes in foreign holdings of controlling stock in Canadian companies 
A)  changes in Canadian holdings of noncontrolling equity in foreign companies 
B)  changes in Canadian holdings of controlling equity in foreign companies 
C)  changes in foreign holdings of controlling equity in Canadian companies 
D)  changes in foreign holdings of controlling stock in Canadian companies

Question 8

Explain the J-curve effect.

Accepted Answer

The J-curve effect explains the reaction

Question 9

Why should the balance of payments always be zero for countries with flexible exchange rates?

Accepted Answer

If the currency of a country is flexible

Question 10

Explain balance on capital account.

Accepted Answer

The capital account records the flow of

Question 11

Which of the following is true under a pure flexible exchange rate regime?

Accepted Answer

A) Balance of current account - Balance of capital account > 0 B) Balance of current account + Balance of capital account < 0 C) Balance of current account + Balance of capital account = 0 D) Balance of current account - Balance of capital account = 0x A) Balance of current account - Balance of capital account > 0 B) Balance of current account + Balance of capital account < 0 C) Balance of current account + Balance of capital account = 0 D) Balance of current account - Balance of capital account = 0x

Question 12

If BCA = BKA = $100 mn,then it must be true that

Accepted Answer

A) BRA = 0 B) BRA > 0 C) BRA < 0 D) BCA = BRA A) BRA = 0 B) BRA > 0 C) BRA < 0 D) BCA = BRA

Question 13

Nokia Inc,a Finnish company,hires a French consulting firm.This transaction will be recorded in France's balance of payments as

Accepted Answer

A)  a credit in the current account 
B)  a debit in the current account 
C)  a credit in the capital account 
D)  a debit in the capital account 
A)  a credit in the current account 
B)  a debit in the current account 
C)  a credit in the capital account 
D)  a debit in the capital account

Question 14

A Chinese state-owned company buys a Canadian saw mill.This transaction will be recorded in the balance of payments as

Accepted Answer

A)  a credit in the current account 
B)  a debit in the current account 
C)  a credit in the capital account 
D)  a debit in the capital account 
A)  a credit in the current account 
B)  a debit in the current account 
C)  a credit in the capital account 
D)  a debit in the capital account

Question 15

Nokia Inc,a Finnish company,hires a French consulting firm.This transaction will be recorded in Finland's balance of payments as

Accepted Answer

A)  a credit in the current account 
B)  a debit in the current account 
C)  a credit in the capital account 
D)  a debit in the capital account 
A)  a credit in the current account 
B)  a debit in the current account 
C)  a credit in the capital account 
D)  a debit in the capital account

Question 16

Assume that the balance-of-payments accounts for a country are recorded correctly. The results are:
balance on the current account = BCA = $130 billion
balance on the capital account = BKA = -$86 billion
balance on the reserves account = BRA = ?
-The balance on the reserves account (BRA),under the fixed exchange regime is:

Accepted Answer

A)  -$44 billion 
B)  $44 billion 
C)  $216 billion 
D)  $0 billion 
A)  -$44 billion 
B)  $44 billion 
C)  $216 billion 
D)  $0 billion

Question 17

The reserve account of the Balance of Payments records:

Accepted Answer

A)  the stock of foreign exchange held by the public 
B)  changes in foreign exchange reserves held by the government 
C)  the stock of gold held by foreign governments 
D)  changes in foreign exchange reserves held by foreign governments 
A)  the stock of foreign exchange held by the public 
B)  changes in foreign exchange reserves held by the government 
C)  the stock of gold held by foreign governments 
D)  changes in foreign exchange reserves held by foreign governments

Question 18

Can a country have a current account and a capital account surplus at the same time?

Accepted Answer

Yes.The balance of payments identity sta

Question 19

Which of the following must be true under the flexible exchange rate regime:

Accepted Answer

A)  BRA = BKA 
B)  Export = Import 
C)  A Current Account deficit (surplus) must be matched by a Capital Account deficit (surplus). 
D)  A Current Account surplus (deficit) must be matched by a Capital Account deficit (surplus). 
A)  BRA = BKA 
B)  Export = Import 
C)  A Current Account deficit (surplus) must be matched by a Capital Account deficit (surplus). 
D)  A Current Account surplus (deficit) must be matched by a Capital Account deficit (surplus).

Question 20

Balance of payment

Accepted Answer

A)  records a country's commerce with one other country 
B)  provides detailed information concerning the demand and supply of a country's currency 
C)  cannot be used to evaluate the performance of a country in international economic competition 
D)  may or may not balance 
A)  records a country's commerce with one other country 
B)  provides detailed information concerning the demand and supply of a country's currency 
C)  cannot be used to evaluate the performance of a country in international economic competition 
D)  may or may not balance

BMW,a German car manufacturer,opens a new subsidiary in China.This transaction will be recorded in China's balance of payments as

Foreign direct investment (FDI)occurs:

PetroCanada exports oil to New York.This transaction will be recorded in the balance of payments as

Which of the following is true about Canada's BCA in 2000-2005?

If a country has a flexible exchange rate system and a deficit on capital account

Portfolio investment refers to:

Explain the J-curve effect.

Why should the balance of payments always be zero for countries with flexible exchange rates?

Explain balance on capital account.

Which of the following is true under a pure flexible exchange rate regime?

If BCA = BKA = $100 mn,then it must be true that

Nokia Inc,a Finnish company,hires a French consulting firm.This transaction will be recorded in France's balance of payments as

A Chinese state-owned company buys a Canadian saw mill.This transaction will be recorded in the balance of payments as

Nokia Inc,a Finnish company,hires a French consulting firm.This transaction will be recorded in Finland's balance of payments as

The reserve account of the Balance of Payments records:

Can a country have a current account and a capital account surplus at the same time?

Which of the following must be true under the flexible exchange rate regime:

Balance of payment

Globalization and the Multinational Firm

International Monetary System

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Management of Translation Exposure

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters

Exam 3: Balance of Payments

BMW,a German car manufacturer,opens a new subsidiary in China.This transaction will be recorded in China's balance of payments as

Foreign direct investment (FDI)occurs:

PetroCanada exports oil to New York.This transaction will be recorded in the balance of payments as

Which of the following is true about Canada's BCA in 2000-2005?

If a country has a flexible exchange rate system and a deficit on capital account

Portfolio investment refers to:

Explain the J-curve effect.

Why should the balance of payments always be zero for countries with flexible exchange rates?

Explain balance on capital account.

Which of the following is true under a pure flexible exchange rate regime?

If BCA = BKA = $100 mn,then it must be true that

Nokia Inc,a Finnish company,hires a French consulting firm.This transaction will be recorded in France's balance of payments as

A Chinese state-owned company buys a Canadian saw mill.This transaction will be recorded in the balance of payments as

Nokia Inc,a Finnish company,hires a French consulting firm.This transaction will be recorded in Finland's balance of payments as

The reserve account of the Balance of Payments records:

Can a country have a current account and a capital account surplus at the same time?

Which of the following must be true under the flexible exchange rate regime:

Balance of payment

Globalization and the Multinational Firm

International Monetary System

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Management of Translation Exposure

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters