Question 1

The capital account is divided into three subcategories: direct investment,portfolio investment,and other investment."Other" 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 2

A country with a current account surplus

Accepted Answer

A) acquires IOUs from foreigners, thereby increasing its net foreign wealth. 
B) must borrow from foreigners or draw down on its previously accumulated foreign wealth. 
C) will experience a reduction in the country's net foreign wealth. 
D) both b) and c) 
A) acquires IOUs from foreigners, thereby increasing its net foreign wealth. 
B) must borrow from foreigners or draw down on its previously accumulated foreign wealth. 
C) will experience a reduction in the country's net foreign wealth. 
D) both b) and c)

Question 3

The U.S.Trade Deficit

Accepted Answer

A) is a capital account surplus. 
B) is a current account deficit. 
C) is both a capital account surplus and a current account deficit. 
D) none of the above 
A) is a capital account surplus. 
B) is a current account deficit. 
C) is both a capital account surplus and a current account deficit. 
D) none of the above

Question 4

A country's international transactions can be grouped into the following three main types:

Accepted Answer

A) current account, medium term account, and long term capital account. 
B) current account, long term capital account, and official reserve account. 
C) current account, capital account, and official reserve account. 
D) capital account, official reserve account, trade account. 
A) current account, medium term account, and long term capital account. 
B) current account, long term capital account, and official reserve account. 
C) current account, capital account, and official reserve account. 
D) capital account, official reserve account, trade account.

Question 5

The current 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 6

Generally speaking,any transaction that results in a payment to 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 7

Continued U.S.trade deficits coupled with foreigners' desire to diversify their currency holdings away from U.S.dollars

Accepted Answer

A) could further diminish the position of the dollar as the dominant reserve currency. 
B) could affect the value of U.S.dollar (e.g.through the currency diversification decisions of Asian central banks). 
C) could lend steam to the emergence of the euro as a credible reserve currency. 
D) all of the above 
A) could further diminish the position of the dollar as the dominant reserve currency. 
B) could affect the value of U.S.dollar (e.g.through the currency diversification decisions of Asian central banks). 
C) could lend steam to the emergence of the euro as a credible reserve currency. 
D) all of the above

Question 8

Current 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)

Question 9

A country experiencing a significant balance-of-payments surplus would be likely to

Accepted Answer

A) expand imports, offering marketing opportunities for foreign enterprises. 
B) refrain from imposing foreign exchange restrictions. 
C) expand exports, offering international marketing opportunities for domestic enterprises. 
D) Both a) and b) 
A) expand imports, offering marketing opportunities for foreign enterprises. 
B) refrain from imposing foreign exchange restrictions. 
C) expand exports, offering international marketing opportunities for domestic enterprises. 
D) Both a) and b)

Question 10

International portfolio investments have boomed in recent years,as a result of

Accepted Answer

A) a depreciating U.S.dollar. 
B) increased gasoline and other commodity prices. 
C) the general relaxation of capital controls and regulation in many countries. 
D) none of the above 
A) a depreciating U.S.dollar. 
B) increased gasoline and other commodity prices. 
C) the general relaxation of capital controls and regulation in many countries. 
D) none of the above

Question 11

In a pure flexible exchange rate regime,a country's central banks will not need to maintain official reserves.Under this regime

Accepted Answer

A) -BCA = BKA. 
B) BCA = - BRA = 0. 
C) BKA = -BRA. 
D) BSA = BCA. 
A) -BCA = BKA. 
B) BCA = - BRA = 0. 
C) BKA = -BRA. 
D) BSA = BCA.

Question 12

Balance of payments

Accepted Answer

A) is defined as the statistical record of a country's international transactions over a certain period of time presented in the form of a double-entry bookkeeping. 
B) provides detailed information concerning the demand and supply of a country's currency. 
C) can be used to evaluate the performance of a country in international economic competition. 
D) all of the above 
A) is defined as the statistical record of a country's international transactions over a certain period of time presented in the form of a double-entry bookkeeping. 
B) provides detailed information concerning the demand and supply of a country's currency. 
C) can be used to evaluate the performance of a country in international economic competition. 
D) all of the above

Question 13

The vast majority of the foreign-exchange reserves held by central banks are denominated in

Accepted Answer

A) local currencies. 
B) U.S.dollars. 
C) Yen. 
D) Euro. 
A) local currencies. 
B) U.S.dollars. 
C) Yen. 
D) Euro.

Question 14

If a country is grappling with a major balance-of-payment difficulty,it may not be able to expand imports from the outside world.Instead,the country may be tempted to

Accepted Answer

A) impose measures to restrict imports. 
B) impose measures to discourage capital outflows. 
C) Both a) and b) 
D) None of the above 
A) impose measures to restrict imports. 
B) impose measures to discourage capital outflows. 
C) Both a) and b) 
D) None of the above

Question 15

If the central banks of the world chose to diversify their foreign-exchange reserves away from the dollar and into the euro,

Accepted Answer

A) this would have the result of a strengthening of the value of the dollar. 
B) this would have the result of a weakening in the value of the dollar. 
C) this would not have much impact, as the information would be lost in the day-to-day volatility of exchange rates. 
A) this would have the result of a strengthening of the value of the dollar. 
B) this would have the result of a weakening in the value of the dollar. 
C) this would not have much impact, as the information would be lost in the day-to-day volatility of exchange rates.

Question 16

Credit entries in the U.S.balance of payments

Accepted Answer

A) result from foreign sales of U.S.goods and services, goodwill, financial claims, and real assets. 
B) result from U.S.purchases of foreign goods and services, goodwill, financial claims, and real assets. 
C) give rise to the demand for dollars. 
D) give rise to the supply of dollars. 
E) both a) and c) 
A) result from foreign sales of U.S.goods and services, goodwill, financial claims, and real assets. 
B) result from U.S.purchases of foreign goods and services, goodwill, financial claims, and real assets. 
C) give rise to the demand for dollars. 
D) give rise to the supply of dollars. 
E) both a) and c)

Question 17

Under the pure flexible exchange rate regime

Accepted Answer

A) the combined balance on the current and capital accounts will be equal in size, but opposite in sign, to the change in the official reserves. 
B) the balance on the current and capital accounts will be equal in size, but opposite in sign. 
C) a current account surplus or deficit must be matched by an official reserves deficit or surplus. 
D) a capital account surplus or deficit must be matched by an official reserves deficit or surplus. 
A) the combined balance on the current and capital accounts will be equal in size, but opposite in sign, to the change in the official reserves. 
B) the balance on the current and capital accounts will be equal in size, but opposite in sign. 
C) a current account surplus or deficit must be matched by an official reserves deficit or surplus. 
D) a capital account surplus or deficit must be matched by an official reserves deficit or surplus.

Question 18

Currently,international reserve assets are comprised of

Accepted Answer

A) gold, platinum, foreign exchanges, and special drawing rights (SDRs). 
B) gold, foreign exchanges, special drawing rights (SDRs), and reserve positions in the International Monetary Fund (IMF). 
C) gold, diamonds, foreign exchanges, and special drawing rights (SDRs). 
D) reserve positions in the International Monetary Fund (IMF), only. 
A) gold, platinum, foreign exchanges, and special drawing rights (SDRs). 
B) gold, foreign exchanges, special drawing rights (SDRs), and reserve positions in the International Monetary Fund (IMF). 
C) gold, diamonds, foreign exchanges, and special drawing rights (SDRs). 
D) reserve positions in the International Monetary Fund (IMF), only.

Question 19

A currency depreciation will begin to improve the trade balance immediately

Accepted Answer

A) if the demand for imports and exports are inelastic. 
B) if the demand for imports and exports are elastic. 
C) if imports decrease and exports decrease. 
D) none of the above 
A) if the demand for imports and exports are inelastic. 
B) if the demand for imports and exports are elastic. 
C) if imports decrease and exports decrease. 
D) none of the above

Question 20

In the latter half of the 1980s,with a strong yen,Japanese firms

Accepted Answer

A) faced difficulty exporting. 
B) could better afford to acquire U.S.assets that had become less expensive in terms of yen. 
C) financed a sharp increase in Japanese FDI in the United States. 
D) all of the above 
A) faced difficulty exporting. 
B) could better afford to acquire U.S.assets that had become less expensive in terms of yen. 
C) financed a sharp increase in Japanese FDI in the United States. 
D) all of the above

Exam 3: Balance of Payments

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

A country with a current account surplus

The U.S.Trade Deficit

A country's international transactions can be grouped into the following three main types:

The current account includes

Generally speaking,any transaction that results in a payment to foreigners

Continued U.S.trade deficits coupled with foreigners' desire to diversify their currency holdings away from U.S.dollars

Current account includes

A country experiencing a significant balance-of-payments surplus would be likely to

International portfolio investments have boomed in recent years,as a result of

In a pure flexible exchange rate regime,a country's central banks will not need to maintain official reserves.Under this regime

Balance of payments

The vast majority of the foreign-exchange reserves held by central banks are denominated in

If a country is grappling with a major balance-of-payment difficulty,it may not be able to expand imports from the outside world.Instead,the country may be tempted to

If the central banks of the world chose to diversify their foreign-exchange reserves away from the dollar and into the euro,

Credit entries in the U.S.balance of payments

Under the pure flexible exchange rate regime

Currently,international reserve assets are comprised of

A currency depreciation will begin to improve the trade balance immediately

In the latter half of the 1980s,with a strong yen,Japanese firms

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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