Question 1

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

Question 2

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 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 3

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 4

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 5

In 2007 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 above 
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 above

Question 6

Government controlled investment funds,known as sovereign wealth funds,

Accepted Answer

A) are playing a less-important role in international finance following the end of the fixed exchange rate era. 
B) are mostly domiciled in Asian and Middle Eastern countries. 
C) are usually responsible for converting trade surpluses and oil revenues into foreign exchange reserves. 
D) none of the above 
A) are playing a less-important role in international finance following the end of the fixed exchange rate era. 
B) are mostly domiciled in Asian and Middle Eastern countries. 
C) are usually responsible for converting trade surpluses and oil revenues into foreign exchange reserves. 
D) none of the above

Question 7

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

Question 8

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 9

Since the balance of payments is presented as a system of double-entry bookkeeping,

Accepted Answer

A) every credit in the account is balanced by a matching debit. 
B) every debit in the account is balanced by a matching credit. 
C) answers a and b are both true 
D) none of the above 
A) every credit in the account is balanced by a matching debit. 
B) every debit in the account is balanced by a matching credit. 
C) answers a and b are both true 
D) none of the above

Question 10

Suppose the InBev Corporation (a non-U.S.MNC)buys the Anheuser-Busch Corporation,paying the U.S.shareholders cash.

Accepted Answer

A) Payment by InBev will be recorded as a debit. 
B) The deposit of the funds by the sellers will be recorded as a debit. 
C) Payment by InBev will be recorded as a credit. 
D) The deposit of the funds by the buyer will be credit. 
A) Payment by InBev will be recorded as a debit. 
B) The deposit of the funds by the sellers will be recorded as a debit. 
C) Payment by InBev will be recorded as a credit. 
D) The deposit of the funds by the buyer will be credit.

Question 11

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 12

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 13

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 14

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 15

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 16

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 17

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 18

Over the last several years the U.S.has run persistent

Accepted Answer

A) balance-of-payments deficits. 
B) balance-of-payments surpluses. 
C) current account deficits. 
D) capital account deficits. 
A) balance-of-payments deficits. 
B) balance-of-payments surpluses. 
C) current account deficits. 
D) capital account deficits.

Question 19

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 20

The capital 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

Exam 3: Balance of Payments

The economic theory of mercantilism holds that

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

BKA stands for

A currency depreciation will begin to improve the trade balance immediately

In 2007 the United States had a current account deficit.The current account deficit implies that the United States

Government controlled investment funds,known as sovereign wealth funds,

The statistical discrepancy in the balance-of-payments accounts

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

Since the balance of payments is presented as a system of double-entry bookkeeping,

Suppose the InBev Corporation (a non-U.S.MNC)buys the Anheuser-Busch Corporation,paying the U.S.shareholders cash.

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

Since security returns tend to have low correlations among countries,

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

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

The factors of production are

Current account includes

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 the last several years the U.S.has run persistent

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

The capital account includes

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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