Question 1

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. 
D) none of the options 
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. 
D) none of the options

Question 2

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

Question 3

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 options 
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 options

Question 4

Among IMF member countries,the dollar's dominant position in the world's reserve holdings may decline to a certain extent as the euro becomes a "known quantity" and its external value becomes more stable.In fact,the euro's share has increased

Accepted Answer

A) from zero percent in 1999 to 19.9 percent in 2015. 
B) from 17.9 percent in 1999 to 19.9 percent in 2015. 
C) from 17.9 percent in 1999 to 52.8 percent in 2015. 
D) none of the options 
A) from zero percent in 1999 to 19.9 percent in 2015. 
B) from 17.9 percent in 1999 to 19.9 percent in 2015. 
C) from 17.9 percent in 1999 to 52.8 percent in 2015. 
D) none of the options

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 options 
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 options

Question 6

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 options 
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 options

Question 7

The notation is Y = GNP = national income
C = consumption
I = private investment
G = government spending
X = exports
M = imports
T = taxes
The difference between a country's savings and investment is given by

Accepted Answer

A) (Y − C − T)− I 
B) I × (Y − C − T) 
C) X − M 
D) GNP − T 
A) (Y − C − T)− I 
B) I × (Y − C − T) 
C) X − M 
D) GNP − T

Question 8

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) must borrow from foreigners or draw down on its previously accumulated foreign wealth and will experience a reduction in the country's net foreign wealth. 
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) must borrow from foreigners or draw down on its previously accumulated foreign wealth and will experience a reduction in the country's net foreign wealth.

Question 9

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 options 
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 options

Question 10

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 11

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 =?
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

When Nestlé,a Swiss firm,bought the American firm Carnation,it was engaged in foreign direct investment.If Nestlé had only bought a non-controlling number of shares of the firm,

Accepted Answer

A) Nestlé would have been engaged in portfolio investment. 
B) Nestlé would have been engaged in a cross-border acquisition. 
C) it would depend if they bought the shares from an American or a Canadian. 
D) none of the options 
A) Nestlé would have been engaged in portfolio investment. 
B) Nestlé would have been engaged in a cross-border acquisition. 
C) it would depend if they bought the shares from an American or a Canadian. 
D) none of the options

Question 13

In 2012,the United States had a current account deficit.The current account deficit implies that the United States

Accepted Answer

A) had a surplus on legal consulting and engineering services. 
B) produced more output than it consumed. 
C) consumed more output than it produced. 
D) none of the options 
A) had a surplus on legal consulting and engineering services. 
B) produced more output than it consumed. 
C) consumed more output than it produced. 
D) none of the options

Question 14

The capital account is divided into three subcategories: direct investment,portfolio investment,and other investment.Direct 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 15

The entries in the "current account" and the "capital account",combined,can be outlined (in alphabetic order)as: (i)direct investment
(ii)factor income
(iii)merchandise
(iv)official transfer
(v)other capital
(vi)portfolio investment
(vii)private transfer
(viii)services
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 16

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 options 
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 options

Question 17

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 18

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) impose measures to restrict imports and discourage capital outflows. 
D) none of the options 
A) impose measures to restrict imports. 
B) impose measures to discourage capital outflows. 
C) impose measures to restrict imports and discourage capital outflows. 
D) none of the options

Question 19

The notation is Y = GNP = national income
C = consumption
I = private investment
G = government spending
X = exports
M = imports
T = taxes
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 ≡ X − M ≡ (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)  If (S − I) < 0, it implies that a country's domestic savings is insufficient to finance domestic investment and if (T − G) < 0, it implies that a country's tax revenue is insufficient to finance government spending. 
D)  none of the options 
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)  If (S − I) < 0, it implies that a country's domestic savings is insufficient to finance domestic investment and if (T − G) < 0, it implies that a country's tax revenue is insufficient to finance government spending. 
D)  none of the options

Question 20

The balance of payments identity is given by BCA + BKA + BRA = 0.Rearrange the identity to solve for the statistical discrepancy.

Accepted Answer

A) The statistical discrepancy = (BCA + BK
A) − BRA 
B) The statistical discrepancy = BCA − BKA + BRA 
C) The statistical discrepancy = BCA − BKA − BRA 
D) The statistical discrepancy = BCA + BKA + BRA 
A) The statistical discrepancy = (BCA + BK
A) − BRA 
B) The statistical discrepancy = BCA − BKA + BRA 
C) The statistical discrepancy = BCA − BKA − BRA 
D) The statistical discrepancy = BCA + BKA + BRA

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

The statistical discrepancy in the balance-of-payments accounts

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

Among IMF member countries,the dollar's dominant position in the world's reserve holdings may decline to a certain extent as the euro becomes a "known quantity" and its external value becomes more stable.In fact,the euro's share has increased

The capital account measures

The current account includes

The notation is Y = GNP = national income C = consumption I = private investment G = government spending X = exports M = imports T = taxes The difference between a country's savings and investment is given by

A country with a current account surplus

The J-curve effect received wide attention when

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

When Nestlé,a Swiss firm,bought the American firm Carnation,it was engaged in foreign direct investment.If Nestlé had only bought a non-controlling number of shares of the firm,

In 2012,the United States had a current account deficit.The current account deficit implies that the United States

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

The entries in the "current account" and the "capital account",combined,can be outlined (in alphabetic order)as: (i)direct investment (ii)factor income (iii)merchandise (iv)official transfer (v)other capital (vi)portfolio investment (vii)private transfer (viii)services Current account includes

The official reserve account includes

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

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

The balance of payments identity is given by BCA + BKA + BRA = 0.Rearrange the identity to solve for the statistical discrepancy.

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

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

The statistical discrepancy in the balance-of-payments accounts

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

Among IMF member countries,the dollar's dominant position in the world's reserve holdings may decline to a certain extent as the euro becomes a "known quantity" and its external value becomes more stable.In fact,the euro's share has increased

The capital account measures

The current account includes

The notation is Y = GNP = national income C = consumption I = private investment G = government spending X = exports M = imports T = taxes The difference between a country's savings and investment is given by

A country with a current account surplus

The J-curve effect received wide attention when

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

When Nestlé,a Swiss firm,bought the American firm Carnation,it was engaged in foreign direct investment.If Nestlé had only bought a non-controlling number of shares of the firm,

In 2012,the United States had a current account deficit.The current account deficit implies that the United States

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

The entries in the "current account" and the "capital account",combined,can be outlined (in alphabetic order)as: (i)direct investment (ii)factor income (iii)merchandise (iv)official transfer (v)other capital (vi)portfolio investment (vii)private transfer (viii)services Current account includes

The official reserve account includes

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

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

The balance of payments identity is given by BCA + BKA + BRA = 0.Rearrange the identity to solve for the statistical discrepancy.

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