Question 1

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 options 
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 options

Question 2

When a country's currency depreciates against the currencies of major trading partners,

Accepted Answer

A) the country's exports tend to rise and imports fall. 
B) the country's exports tend to fall and imports rise. 
C) the country's exports tend to rise and imports rise. 
D) the country's exports tend to fall and imports fall. 
A) the country's exports tend to rise and imports fall. 
B) the country's exports tend to fall and imports rise. 
C) the country's exports tend to rise and imports rise. 
D) the country's exports tend to fall and imports fall.

Question 3

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 4

Statistical discrepancy,which,by definition,represents errors and omissions,

Accepted Answer

A) cannot be calculated directly. 
B) is calculated by taking into account the balance-of-payments identity. 
C) probably has some elements that are honest mistakes,it can't all be money laundering and drugs. 
D) all of the options 
A) cannot be calculated directly. 
B) is calculated by taking into account the balance-of-payments identity. 
C) probably has some elements that are honest mistakes,it can't all be money laundering and drugs. 
D) all of the options

Question 5

Regarding the statistical discrepancy in the balance-of-payments accounts,

Accepted Answer

A) there is some evidence that financial transactions may be mainly responsible for the discrepancy. 
B) the sum of the balance on the capital account and the statistical discrepancy is very close to the balance of the current account in magnitude. 
C) it tends to be positive one year and negative in others,so it's safe to ignore it. 
D) there is some evidence that financial transactions may be mainly responsible for the discrepancy,and the sum of the balance on the capital account and the statistical discrepancy is very close to the balance of the current account in magnitude. 
A) there is some evidence that financial transactions may be mainly responsible for the discrepancy. 
B) the sum of the balance on the capital account and the statistical discrepancy is very close to the balance of the current account in magnitude. 
C) it tends to be positive one year and negative in others,so it's safe to ignore it. 
D) there is some evidence that financial transactions may be mainly responsible for the discrepancy,and the sum of the balance on the capital account and the statistical discrepancy is very close to the balance of the current account in magnitude.

Question 6

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 7

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 8

Under the fixed 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 9

The United States is considered

Accepted Answer

A) a net creditor nation. 
B) a net debtor nation. 
A) a net creditor nation. 
B) a net debtor nation.

Question 10

The balance of payments records

Accepted Answer

A) only international trade,(exports and imports). 
B) only cross-border investments (FDI and portfolio investment). 
C) not only international trade,(exports and imports)but also cross-border investments. 
D) none of the options 
A) only international trade,(exports and imports). 
B) only cross-border investments (FDI and portfolio investment). 
C) not only international trade,(exports and imports)but also cross-border investments. 
D) none of the options

Question 11

Which of the following would not count as a foreign-exchange reserve held by a central bank?

Accepted Answer

A) The local currency 
B) U.S.dollars 
C) SDRs 
D) Euro 
A) The local currency 
B) U.S.dollars 
C) SDRs 
D) Euro

Question 12

If a country must make a net payment to foreigners because of a balance-of-payments deficit,the country should

Accepted Answer

A) either increase its official reserve assets or borrow anew from foreigners. 
B) either run down its official reserve assets or borrow anew from foreigners. 
C) either run down its official reserve assets or lend more foreigners. 
D) none of the options 
A) either increase its official reserve assets or borrow anew from foreigners. 
B) either run down its official reserve assets or borrow anew from foreigners. 
C) either run down its official reserve assets or lend more foreigners. 
D) none of the options

Question 13

The "J-curve effect"

Accepted Answer

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

Question 14

The notation is Y = GNP = national income
C = consumption
I = private investment
G = government spending
X = exports
M = imports
T = taxes
Private savings,S,is defined as S = Y − C − T.Which of the following is also accurate?

Accepted Answer

A) S = C + I + G + X − M − C − T 
B) S = C + I + G + X 
C) S = C + X − M − C − T 
D) S = C + G + X − M − C − T 
A) S = C + I + G + X − M − C − T 
B) S = C + I + G + X 
C) S = C + X − M − C − T 
D) S = C + G + X − M − C − T

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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
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)

Question 17

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 options 
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 options

Since security returns tend to have low correlations among countries,

When a country's currency depreciates against the currencies of major trading partners,

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

Statistical discrepancy,which,by definition,represents errors and omissions,

Regarding the statistical discrepancy in the balance-of-payments accounts,

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

The capital account may be divided into three categories-

Under the fixed exchange rate regime,

The United States is considered

The balance of payments records

Which of the following would not count as a foreign-exchange reserve held by a central bank?

If a country must make a net payment to foreigners because of a balance-of-payments deficit,the country should

The "J-curve effect"

The notation is Y = GNP = national income C = consumption I = private investment G = government spending X = exports M = imports T = taxes Private savings,S,is defined as S = Y − C − T.Which of the following is also accurate?

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

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 Capital account includes

Factor income

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

Since security returns tend to have low correlations among countries,

When a country's currency depreciates against the currencies of major trading partners,

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

Statistical discrepancy,which,by definition,represents errors and omissions,

Regarding the statistical discrepancy in the balance-of-payments accounts,

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

The capital account may be divided into three categories-

Under the fixed exchange rate regime,

The United States is considered

The balance of payments records

Which of the following would not count as a foreign-exchange reserve held by a central bank?

If a country must make a net payment to foreigners because of a balance-of-payments deficit,the country should

The "J-curve effect"

The notation is Y = GNP = national income C = consumption I = private investment G = government spending X = exports M = imports T = taxes Private savings,S,is defined as S = Y − C − T.Which of the following is also accurate?

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

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 Capital account includes

Factor income

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