Question 1

The J-curve effect received wide attention when

Accepted Answer

A) the British trade balance worsened after a strengthening of the pound in 1967. 
B) the British trade balance worsened after a devaluation of the pound in 1967. 
C) the British trade balance improved after a devaluation of the pound in 1967. 
D) none of the above 
A) the British trade balance worsened after a strengthening of the pound in 1967. 
B) the British trade balance worsened after a devaluation of the pound in 1967. 
C) the British trade balance improved after a devaluation of the pound in 1967. 
D) none of the above

Question 2

If the difference between tax revenue and government expenditures is negative,it implies that

Accepted Answer

A) tax revenue is insufficient to cover government spending. 
B) a government budget deficit exists. 
C) the government will be issuing new debt securities. 
D) all of the above 
A) tax revenue is insufficient to cover government spending. 
B) a government budget deficit exists. 
C) the government will be issuing new debt securities. 
D) all of the above

Question 3

The factors of production are

Accepted Answer

A) land, labor, capital, and entrepreneurial ability. 
B) interest, wages and dividends. 
C) payments and receipts of interest, dividends, and other income on foreign investments that were previously made. 
D) none of the above 
A) land, labor, capital, and entrepreneurial ability. 
B) interest, wages and dividends. 
C) payments and receipts of interest, dividends, and other income on foreign investments that were previously made. 
D) none of the above

Question 4

International reserve assets include "foreign exchanges".These are

Accepted Answer

A) Special Drawing Rights (SDRs) at the IMF. 
B) reserve positions in the International Monetary Fund (IMF). 
C) foreign currency held by a country's central bank. 
D) none of the above 
A) Special Drawing Rights (SDRs) at the IMF. 
B) reserve positions in the International Monetary Fund (IMF). 
C) foreign currency held by a country's central bank. 
D) none of the above

Question 5

If for a particular county an increase in the interest rate is more or less matched by an expected depreciation in the local currency,

Accepted Answer

A) traders will probably be tempted to find another country to invest in. 
B) the interest rate increase per se will not be enough to spark capital flow into the country. 
C) both a) and b) are true 
D) capital will glow out of the country as the disgruntled citizens riot and go to war with the neighbors. 
A) traders will probably be tempted to find another country to invest in. 
B) the interest rate increase per se will not be enough to spark capital flow into the country. 
C) both a) and b) are true 
D) capital will glow out of the country as the disgruntled citizens riot and go to war with the neighbors.

Question 6

Over half of all dollar bills in circulation are held outside American's borders.

Accepted Answer

A) True 
 B)False

Question 7

The world's largest debtor nation and creditor nation,respectively,are

Accepted Answer

A) Japan and the U.S. 
B) The U.S.and Japan. 
C) The U.S.and Canada. 
D) Great Britain and Mexico. 
A) Japan and the U.S. 
B) The U.S.and Japan. 
C) The U.S.and Canada. 
D) Great Britain and Mexico.

Question 8

Since security returns tend to have low correlations among countries,

Accepted Answer

A) investors can reduce risk more effectively if they diversify their portfolio holdings internationally rather than purely domestically. 
B) investors who have a domestically diversified portfolio, with exposures across industry types will not gain much from diversifying abroad. 
C) investors who diversify internationally will likely underperform investors who keep all their investments in one country. 
D) none of the above 
A) investors can reduce risk more effectively if they diversify their portfolio holdings internationally rather than purely domestically. 
B) investors who have a domestically diversified portfolio, with exposures across industry types will not gain much from diversifying abroad. 
C) investors who diversify internationally will likely underperform investors who keep all their investments in one country. 
D) none of the above

Question 9

If the United States imports more than it exports,then

Accepted Answer

A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. 
B) one can infer that the U.S.dollar would be under pressure to depreciate against other currencies. 
C) a) and b) 
D) None of the above 
A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. 
B) one can infer that the U.S.dollar would be under pressure to depreciate against other currencies. 
C) a) and b) 
D) None of the above

Question 10

The current account balance,which is the difference between a country's exports and imports,is a component of the country's GNP.Other components of GNP include

Accepted Answer

A) consumption and investment and government expenditure. 
B) consumption and government expenditure and net exports. 
C) consumption and net exports and government expenditure. 
D) consumption less imports. 
A) consumption and investment and government expenditure. 
B) consumption and government expenditure and net exports. 
C) consumption and net exports and government expenditure. 
D) consumption less imports.

Question 11

The official reserve account includes

Accepted Answer

A) the export and import of goods and services. 
B) all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses. 
C) all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights (SDRs). 
D) none of the above 
A) the export and import of goods and services. 
B) all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses. 
C) all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights (SDRs). 
D) none of the above

Question 12

A country that gives foreign aid to another country can be viewed as

Accepted Answer

A) importing goodwill from the latter. 
B) exporting goodwill to the latter. 
A) importing goodwill from the latter. 
B) exporting goodwill to the latter.

Question 13

The most important international reserve asset,comprising 94 percent of the total reserve assets held by IMF member countries is

Accepted Answer

A) gold. 
B) foreign exchanges. 
C) special Drawing Rights (SDRs). 
D) reserve positions in the International Monetary Fund (IMF). 
A) gold. 
B) foreign exchanges. 
C) special Drawing Rights (SDRs). 
D) reserve positions in the International Monetary Fund (IMF).

Question 14

BCA stands for

Accepted Answer

A) the balance on the current account. 
B) the balance on the capital account. 
C) the balance on the official reserves. 
D) net imports. 
A) the balance on the current account. 
B) the balance on the capital account. 
C) the balance on the official reserves. 
D) net imports.

Question 15

Factor income

Accepted Answer

A) consists largely of interest, dividends, and other income on foreign investments. 
B) is a theoretical construct of the factors of production, land, labor, capital, and entrepreneurial ability. 
C) is generally a very minor part of national income accounting, smaller than the statistical discrepancy. 
D) none of the above 
A) consists largely of interest, dividends, and other income on foreign investments. 
B) is a theoretical construct of the factors of production, land, labor, capital, and entrepreneurial ability. 
C) is generally a very minor part of national income accounting, smaller than the statistical discrepancy. 
D) none of the above

Question 16

In the long run,both exports and imports tend to be

Accepted Answer

A) unresponsive to changes in exchange rates. 
B) responsive to changes in exchange rates. 
C) both a) and b) 
D) none of the above 
A) unresponsive to changes in exchange rates. 
B) responsive to changes in exchange rates. 
C) both a) and b) 
D) none of the above

Question 17

The "J-curve effect"

Accepted Answer

A) happens most of the time, in the short run. 
B) actually only occurs in about 40 percent of the cases according to a study by Sebastian Edwards. 
C) is a long-run phenomenon, not a short-run one. 
D) none of the above. 
A) happens most of the time, in the short run. 
B) actually only occurs in about 40 percent of the cases according to a study by Sebastian Edwards. 
C) is a long-run phenomenon, not a short-run one. 
D) none of the above.

Question 18

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) none of the above 
A) -$44 billion 
B) $44 billion 
C) $216 billion 
D) none of the above

Question 19

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures.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) When BCA is negative, it implies that government budget deficits an/or part of domestic investment are being finance with foreign-controlled capital. 
D) All of the above are true. 
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) When BCA is negative, it implies that government budget deficits an/or part of domestic investment are being finance with foreign-controlled capital. 
D) All of the above are true.

Question 20

The economic theory of mercantilism holds that

Accepted Answer

A) a continuing trade surplus should be a government's major policy goal. 
B) the main source of wealth of a country is its productive capacity. 
C) free trade is the result of countries exploiting their comparative advantage. 
D) none of the above 
A) a continuing trade surplus should be a government's major policy goal. 
B) the main source of wealth of a country is its productive capacity. 
C) free trade is the result of countries exploiting their comparative advantage. 
D) none of the above

Exam 3: Balance of Payments

The J-curve effect received wide attention when

If the difference between tax revenue and government expenditures is negative,it implies that

The factors of production are

International reserve assets include "foreign exchanges".These are

If for a particular county an increase in the interest rate is more or less matched by an expected depreciation in the local currency,

Over half of all dollar bills in circulation are held outside American's borders.

The world's largest debtor nation and creditor nation,respectively,are

Since security returns tend to have low correlations among countries,

If the United States imports more than it exports,then

The current account balance,which is the difference between a country's exports and imports,is a component of the country's GNP.Other components of GNP include

The official reserve account includes

A country that gives foreign aid to another country can be viewed as

The most important international reserve asset,comprising 94 percent of the total reserve assets held by IMF member countries is

BCA stands for

Factor income

In the long run,both exports and imports tend to be

The "J-curve effect"

The balance on the reserves account (BRA),under the fixed exchange regime is

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures.Given this,which of the following is a true statement?

The economic theory of mercantilism holds that

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

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