Question 1

If the difference between a country's savings and investment is negative,it implies that

Accepted Answer

A) a country's domestic savings is insufficient to finance domestic investment. 
B) a government budget deficit exists. 
C) a country's domestic savings is sufficient to finance domestic investment 
D) none of the options 
A) a country's domestic savings is insufficient to finance domestic investment. 
B) a government budget deficit exists. 
C) a country's domestic savings is sufficient to finance domestic investment 
D) none of the options

Question 2

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) should either run down its official reserve assets (e.g.,gold,foreign exchanges,and SDRs)or borrow anew from foreign central banks. 
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) should either run down its official reserve assets (e.g.,gold,foreign exchanges,and SDRs)or borrow anew from foreign central banks.

Question 3

Transactions in currency,bank deposits and so forth

Accepted Answer

A) tend to be insensitive to both changes in relative interest rates and the anticipated change in exchange rate. 
B) tend to be sensitive to both changes in relative interest rates and the anticipated change in exchange rate. 
C) tend to be sensitive to changes in relative interest rates but insensitive to the anticipated change in exchange rate. 
D) tend to be insensitive to changes in relative interest rates but sensitive to the anticipated change in exchange rate. 
A) tend to be insensitive to both changes in relative interest rates and the anticipated change in exchange rate. 
B) tend to be sensitive to both changes in relative interest rates and the anticipated change in exchange rate. 
C) tend to be sensitive to changes in relative interest rates but insensitive to the anticipated change in exchange rate. 
D) tend to be insensitive to changes in relative interest rates but sensitive to the anticipated change in exchange rate.

Question 4

The notation is Y = GNP = national income
C = consumption
I = private investment
G = government spending
X = exports
M = imports
T = taxes
National income,or Gross National Product is given by

Accepted Answer

A) GNP ≡ Y ≡ C + I + G + X + M 
B) GNP ≡ Y ≡ C + I + G + X − M 
C) GNP ≡ I ≡ C + Y + G + X − M 
D) GNP ≡ Y ≡ C + I + X + M − G 
A) GNP ≡ Y ≡ C + I + G + X + M 
B) GNP ≡ Y ≡ C + I + G + X − M 
C) GNP ≡ I ≡ C + Y + G + X − M 
D) GNP ≡ Y ≡ C + I + X + M − G

Question 5

Suppose a country is currently experiencing a trade deficit.In the long run,this could be self-correcting if

Accepted Answer

A) the deficit exists because of the import demand for capital goods. 
B) the deficit exists because of the import demand for consumption goods. 
C) the deficit exists because foreigners want to buy the country's currency as an investment. 
D) none of the options 
A) the deficit exists because of the import demand for capital goods. 
B) the deficit exists because of the import demand for consumption goods. 
C) the deficit exists because foreigners want to buy the country's currency as an investment. 
D) none of the options

Question 6

A depreciation will begin to improve the trade balance immediately if

Accepted Answer

A) imports and exports are responsive to the exchange rate changes. 
B) imports and exports are inelastic to the exchange rate changes. 
C) consumers exhibit brand loyalty and price inelasticity. 
D) imports and exports are inelastic to the exchange rate changes and consumers exhibit brand loyalty and price inelasticity. 
A) imports and exports are responsive to the exchange rate changes. 
B) imports and exports are inelastic to the exchange rate changes. 
C) consumers exhibit brand loyalty and price inelasticity. 
D) imports and exports are inelastic to the exchange rate changes and consumers exhibit brand loyalty and price inelasticity.

Question 7

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 8

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 options 
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 options

Question 9

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 options 
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 options

Question 10

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

Question 11

As of 2011,gold accounted for

Accepted Answer

A) 90 percent of the total reserve assets held by IMF member countries. 
B) 70 percent of the total reserve assets held by IMF member countries. 
C) approximately 50 percent of the total reserve assets held by IMF member countries. 
D) less than one percent of the total reserve assets held by IMF member countries. 
A) 90 percent of the total reserve assets held by IMF member countries. 
B) 70 percent of the total reserve assets held by IMF member countries. 
C) approximately 50 percent of the total reserve assets held by IMF member countries. 
D) less than one percent of the total reserve assets held by IMF member countries.

Question 12

The most popular reserve currency is now the

Accepted Answer

A) U.S.dollar. 
B) Euro. 
C) Japanese Yen. 
D) none of the options 
A) U.S.dollar. 
B) Euro. 
C) Japanese Yen. 
D) none of the options

Question 13

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 14

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 options 
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 options

Question 15

Assume that the balance-of-payments accounts for a country are recorded correctly. 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) none of the options 
A) −$44 billion. 
B) $44 billion. 
C) $216 billion. 
D) none of the options

Question 16

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 options 
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 options

Question 17

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 options 
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 options

Question 18

The "J-curve effect" shows

Accepted Answer

A) the initial deterioration and the eventual improvement of a country's trade balance following a currency depreciation. 
B) the initial improvement and the eventual depreciation of a country's trade balance following a currency depreciation. 
C) the trade balance's lack of responsiveness to the exchanges rate changes. 
D) none of the options 
A) the initial deterioration and the eventual improvement of a country's trade balance following a currency depreciation. 
B) the initial improvement and the eventual depreciation of a country's trade balance following a currency depreciation. 
C) the trade balance's lack of responsiveness to the exchanges rate changes. 
D) none of the options

Question 19

BKA 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 20

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.

If the difference between a country's savings and investment is negative,it implies that

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

Transactions in currency,bank deposits and so forth

The notation is Y = GNP = national income C = consumption I = private investment G = government spending X = exports M = imports T = taxes National income,or Gross National Product is given by

Suppose a country is currently experiencing a trade deficit.In the long run,this could be self-correcting if

A depreciation will begin to improve the trade balance immediately if

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 U.S.Trade Deficit

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

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

As of 2011,gold accounted for

The most popular reserve currency is now the

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

The economic theory of mercantilism holds that

International reserve assets include "foreign exchanges".These are

The factors of production are

The "J-curve effect" shows

BKA stands for

BCA stands for

International Monetary System

Globalization and the Multinational Firm

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

Exam 3: Balance of Payments

If the difference between a country's savings and investment is negative,it implies that

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

Transactions in currency,bank deposits and so forth

The notation is Y = GNP = national income C = consumption I = private investment G = government spending X = exports M = imports T = taxes National income,or Gross National Product is given by

Suppose a country is currently experiencing a trade deficit.In the long run,this could be self-correcting if

A depreciation will begin to improve the trade balance immediately if

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 U.S.Trade Deficit

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

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

As of 2011,gold accounted for

The most popular reserve currency is now the

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

The economic theory of mercantilism holds that

International reserve assets include "foreign exchanges".These are

The factors of production are

The "J-curve effect" shows

BKA stands for

BCA stands for

International Monetary System

Globalization and the Multinational Firm

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