Question 1

Foreign direct investment (FDI)occurs

Accepted Answer

A) when an investor acquires a measure of control of a foreign business. 
B) when there is an acquisition, by a foreign entity in the U.S., of 10 percent or more of the voting shares of a business. 
C) with sales and purchases of foreign stocks and bonds that do not involve a transfer of control. 
D) both a) and b) 
A) when an investor acquires a measure of control of a foreign business. 
B) when there is an acquisition, by a foreign entity in the U.S., of 10 percent or more of the voting shares of a business. 
C) with sales and purchases of foreign stocks and bonds that do not involve a transfer of control. 
D) both a) and b) D

Question 2

The central bank of the United States is

Accepted Answer

A) the New York Fed. 
B) the Federal Reserve System. 
C) the EXIM bank. 
D) none of the above-the U.S.does not have a central bank. 
A) the New York Fed. 
B) the Federal Reserve System. 
C) the EXIM bank. 
D) none of the above-the U.S.does not have a central bank. B

Question 3

Over the last several years the U.S.has run persistent

Accepted Answer

A) balance-of-payments deficits. 
B) balance-of-payments surpluses. 
C) current account deficits. 
D) capital account deficits. 
A) balance-of-payments deficits. 
B) balance-of-payments surpluses. 
C) current account deficits. 
D) capital account deficits. C

Question 4

More important than the absolute size of a country's balance-of-payments disequilibrium

Accepted Answer

A) is the nature and cause of the disequilibrium. 
B) is whether it is a trade surplus or deficit. 
C) is whether the local government is mercantilist or not. 
D) Nothing is more important than the absolute size of a country's balance-of-payments disequilibrium. 
A) is the nature and cause of the disequilibrium. 
B) is whether it is a trade surplus or deficit. 
C) is whether the local government is mercantilist or not. 
D) Nothing is more important than the absolute size of a country's balance-of-payments disequilibrium.

Question 5

The capital account measures

Accepted Answer

A) the sum of U.S.sales of assets to foreigners and U.S.purchases of foreign assets. 
B) the difference between U.S.sales of assets to foreigners and U.S.purchases of foreign assets. 
C) the difference between U.S.sales of manufactured goods to foreigners and U.S.purchases of foreign products. 
D) none of the above 
A) the sum of U.S.sales of assets to foreigners and U.S.purchases of foreign assets. 
B) the difference between U.S.sales of assets to foreigners and U.S.purchases of foreign assets. 
C) the difference between U.S.sales of manufactured goods to foreigners and U.S.purchases of foreign products. 
D) none of the above

Question 6

The capital account is divided into three subcategories: direct investment,portfolio investment,and other investment.Portfolio investment involves

Accepted Answer

A) acquisitions of controlling interests in foreign businesses. 
B) investments in foreign stocks and bonds that do not involve acquisitions of control. 
C) bank deposits, currency investment, trade credit, and the like. 
D) all of the above 
A) acquisitions of controlling interests in foreign businesses. 
B) investments in foreign stocks and bonds that do not involve acquisitions of control. 
C) bank deposits, currency investment, trade credit, and the like. 
D) all of the above

Question 7

The most popular reserve currency is now the

Accepted Answer

A) U.S.dollar. 
B) Euro. 
C) Japanese Yen. 
A) U.S.dollar. 
B) Euro. 
C) Japanese Yen.

Question 8

In the short run a currency depreciation can make a trade balance worse if

Accepted Answer

A) there is no domestic producer of an import. 
B) there is no domestic buyer for an import. 
C) there is no export market for a country's output. 
A) there is no domestic producer of an import. 
B) there is no domestic buyer for an import. 
C) there is no export market for a country's output.

Question 9

Government controlled investment funds,known as sovereign wealth funds,

Accepted Answer

A) are playing a less-important role in international finance following the end of the fixed exchange rate era. 
B) are mostly domiciled in Asian and Middle Eastern countries. 
C) are usually responsible for converting trade surpluses and oil revenues into foreign exchange reserves. 
D) none of the above 
A) are playing a less-important role in international finance following the end of the fixed exchange rate era. 
B) are mostly domiciled in Asian and Middle Eastern countries. 
C) are usually responsible for converting trade surpluses and oil revenues into foreign exchange reserves. 
D) none of the above

Question 10

Generally speaking,any transaction that results in a receipt from foreigners

Accepted Answer

A) will be recorded as a debit, with a negative sign, in the U.S.balance of payments. 
B) will be recorded as a debit, with a positive sign, in the U.S.balance of payments. 
C) will be recorded as a credit, with a negative sign, in the U.S.balance of payments. 
D) will be recorded as a credit, with a positive sign, in the U.S.balance of payments. 
A) will be recorded as a debit, with a negative sign, in the U.S.balance of payments. 
B) will be recorded as a debit, with a positive sign, in the U.S.balance of payments. 
C) will be recorded as a credit, with a negative sign, in the U.S.balance of payments. 
D) will be recorded as a credit, with a positive sign, in the U.S.balance of payments.

Question 11

Suppose the McDonalds Corporation imports Canadian beef,paying for it by transferring the funds to a New York bank account kept by the Canadian Beef producer.

Accepted Answer

A) Payment by McDonalds will be recorded as a debit. 
B) The deposit of the funds by the seller will be recorded as a debit. 
C) Payment by McDonalds will be recorded as a credit. 
D) The deposit of the funds by the buyer will be credit. 
A) Payment by McDonalds will be recorded as a debit. 
B) The deposit of the funds by the seller will be recorded as a debit. 
C) Payment by McDonalds will be recorded as a credit. 
D) The deposit of the funds by the buyer will be credit.

Question 12

The statistical discrepancy in the balance-of-payments accounts

Accepted Answer

A) arise since recordings of payments and receipts are done at different times, in different places, possibly using different methods. 
B) arise since some transactions (illegal transactions?) occur "off the books". 
C) represents omitted and misrecorded transactions. 
D) all of the above 
A) arise since recordings of payments and receipts are done at different times, in different places, possibly using different methods. 
B) arise since some transactions (illegal transactions?) occur "off the books". 
C) represents omitted and misrecorded transactions. 
D) all of the above

Question 13

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures.This relationship is given by BCA  $\equiv$ X - M  $\equiv$ (S - I)+ (T - G).Given this,which of the following is a true statement?

Accepted Answer

A) If (S - I) < 0, it implies that a country's domestic savings is insufficient to finance domestic investment. 
B) If (T - G) < 0, it implies that a country's tax revenue is insufficient to finance government spending. 
C) both a) and b) are true 
D) none of the above 
A) If (S - I) < 0, it implies that a country's domestic savings is insufficient to finance domestic investment. 
B) If (T - G) < 0, it implies that a country's tax revenue is insufficient to finance government spending. 
C) both a) and b) are true 
D) none of the above

Question 14

When a country must make a net payment to foreigners because of a balance-of-payments deficit,the central bank of the country

Accepted Answer

A) should do nothing. 
B) should run down its official reserve assets (e.g.gold, foreign exchanges, and SDRs). 
C) should borrow anew from foreign central banks. 
D) either b) or c) will work. 
A) should do nothing. 
B) should run down its official reserve assets (e.g.gold, foreign exchanges, and SDRs). 
C) should borrow anew from foreign central banks. 
D) either b) or c) will work.

Question 15

The difference between Foreign Direct Investment and Portfolio Investment is that

Accepted Answer

A) Portfolio Investment mostly represents the sale and purchase of foreign financial assets such as stocks and bonds that do not involve a transfer of control. 
B) Foreign Direct Investment mostly represents the sale and purchase of foreign financial assets such as stocks whereas Portfolio Investment mostly involves the sales and purchase of foreign bonds. 
C) Foreign Direct Investment is about buying land and building factories, whereas portfolio investment is about buying stocks and bonds. 
D) All of the above 
A) Portfolio Investment mostly represents the sale and purchase of foreign financial assets such as stocks and bonds that do not involve a transfer of control. 
B) Foreign Direct Investment mostly represents the sale and purchase of foreign financial assets such as stocks whereas Portfolio Investment mostly involves the sales and purchase of foreign bonds. 
C) Foreign Direct Investment is about buying land and building factories, whereas portfolio investment is about buying stocks and bonds. 
D) All of the above

Question 16

Which of the following is most indicative of the pressure that a country's currency faces for depreciation or appreciation?

Accepted Answer

A) The current account 
B) The capital account 
C) The statistical discrepancies 
D) The official settlement balance 
A) The current account 
B) The capital account 
C) The statistical discrepancies 
D) The official settlement balance

Question 17

Since the balance of payments is presented as a system of double-entry bookkeeping,

Accepted Answer

A) every credit in the account is balanced by a matching debit. 
B) every debit in the account is balanced by a matching credit. 
C) answers a) and b) are both true 
D) none of the above 
A) every credit in the account is balanced by a matching debit. 
B) every debit in the account is balanced by a matching credit. 
C) answers a) and b) are both true 
D) none of the above

Question 18

When the balance-of-payments accounts are recorded correctly,the combined balance of the current account,the capital account,and the reserves account must be

Accepted Answer

A) equal in magnitude to the country's national debt. 
B) zero. 
C) equal in magnitude to the Trade Deficit or Surplus. 
D) none of the above 
A) equal in magnitude to the country's national debt. 
B) zero. 
C) equal in magnitude to the Trade Deficit or Surplus. 
D) none of the above

Question 19

The capital account may be divided into three categories:

Accepted Answer

A) cross-border mergers and acquisitions, portfolio investment, and other investment. 
B) direct investment, portfolio investment, and Cross-border mergers and acquisitions. 
C) direct investment, mergers and acquisitions, and other investment. 
D) direct investment, portfolio investment, and other investment. 
A) cross-border mergers and acquisitions, portfolio investment, and other investment. 
B) direct investment, portfolio investment, and Cross-border mergers and acquisitions. 
C) direct investment, mergers and acquisitions, and other investment. 
D) direct investment, portfolio investment, and other investment.

Question 20

Capital account includes

Accepted Answer

A) (i), (ii), and (iii) 
B) (ii), (iii), and (vii) 
C) (iv), (v), and (vii) 
D) (i), (v), and (vi) 
A) (i), (ii), and (iii) 
B) (ii), (iii), and (vii) 
C) (iv), (v), and (vii) 
D) (i), (v), and (vi)

Exam 3: Balance of Payments

Foreign direct investment (FDI)occurs

The central bank of the United States is

Over the last several years the U.S.has run persistent

More important than the absolute size of a country's balance-of-payments disequilibrium

The capital account measures

The capital account is divided into three subcategories: direct investment,portfolio investment,and other investment.Portfolio investment involves

The most popular reserve currency is now the

In the short run a currency depreciation can make a trade balance worse if

Government controlled investment funds,known as sovereign wealth funds,

Generally speaking,any transaction that results in a receipt from foreigners

Suppose the McDonalds Corporation imports Canadian beef,paying for it by transferring the funds to a New York bank account kept by the Canadian Beef producer.

The statistical discrepancy in the balance-of-payments accounts

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures.This relationship is given by BCA ≡\equiv≡ X - M ≡\equiv≡ (S - I)+ (T - G).Given this,which of the following is a true statement?

When a country must make a net payment to foreigners because of a balance-of-payments deficit,the central bank of the country

The difference between Foreign Direct Investment and Portfolio Investment is that

Which of the following is most indicative of the pressure that a country's currency faces for depreciation or appreciation?

Since the balance of payments is presented as a system of double-entry bookkeeping,

When the balance-of-payments accounts are recorded correctly,the combined balance of the current account,the capital account,and the reserves account must be

The capital account may be divided into three categories:

Capital account includes

Globalization and the Multinational Firm

International Monetary System

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures.This relationship is given by BCA $\equiv$ X - M $\equiv$ (S - I)+ (T - G).Given this,which of the following is a true statement?