Question 1

The balance of payments identity is given by BCA + BKA + BRA = 0.Rearrange the identity for a country with a pure flexible exchange rate regime.

Accepted Answer

A) BCA + BKA + BRA = 0 
B) BCA = -BKA 
C) BCA + BKA = -BRA 
D) BRA = -BCA 
A) BCA + BKA + BRA = 0 
B) BCA = -BKA 
C) BCA + BKA = -BRA 
D) BRA = -BCA

Question 2

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 above 
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 above

Question 3

If Japan exports more than it imports,then

Accepted Answer

A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. 
B) one can infer that the yen would be likely to appreciate against other currencies. 
C) a and b 
D) None of the above 
A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. 
B) one can infer that the yen would be likely to appreciate against other currencies. 
C) a and b 
D) None of the above

Question 4

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 5

The "one word that haunts the dollar" is

Accepted Answer

A) (Central bank) diversification. 
B) Reunification (Korean). 
C) Euro. 
D) (Current account) deficit. 
A) (Central bank) diversification. 
B) Reunification (Korean). 
C) Euro. 
D) (Current account) deficit.

Question 6

The difference between a country's savings and investment is given by

Accepted Answer

A) S - I 
B) I * S 
C) X - M 
D) GNP - Y 
A) S - I 
B) I * S 
C) X - M 
D) GNP - Y

Question 7

Invisible trade refers to

Accepted Answer

A) services that avoid tax payments. 
B) the underground economy. 
C) legal, consulting, and engineering services. 
D) tourist expenditures, only. 
A) services that avoid tax payments. 
B) the underground economy. 
C) legal, consulting, and engineering services. 
D) tourist expenditures, only.

Question 8

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 above 
A) -$44 billion. 
B) $44 billion. 
C) $216 billion. 
D) none of the above

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

Which of the following is a true statement?

Accepted Answer

A) BCA $\equiv$ X - M 
B) BKA $\equiv$ X - M 
C) BKA - BCA $\equiv$ X - M 
D) BKa $\equiv$ X - M 
A) BCA $\equiv$ X - M 
B) BKA $\equiv$ X - M 
C) BKA - BCA $\equiv$ X - M 
D) BKa $\equiv$ X - M

Question 11

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 12

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) either b) or c) will work. 
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) either b) or c) will work.

Question 13

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 14

The current account balance is given by

Accepted Answer

A) C + I + G + X + M 
B) X - M 
C) I + X + M 
D) M - X 
A) C + I + G + X + M 
B) X - M 
C) I + X + M 
D) M - X

Question 15

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 16

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) b and c 
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) b and c

Question 17

The current account is divided into four finer categories:

Accepted Answer

A) merchandise trade, services, factor income, and statistical discrepancy. 
B) merchandise trade, services, factor income, and unilateral transfers. 
C) merchandise trade, services, portfolio investment, and unilateral transfers. 
D) merchandise trade, services, factor income, and direct investment. 
A) merchandise trade, services, factor income, and statistical discrepancy. 
B) merchandise trade, services, factor income, and unilateral transfers. 
C) merchandise trade, services, portfolio investment, and unilateral transfers. 
D) merchandise trade, services, factor income, and direct investment.

Question 18

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 $\equiv$ X - M $\equiv$ (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) both a and b are true 
D) none of the above 
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) both a and b are true 
D) none of the above

Question 19

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 above 
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 above

Question 20

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 above 
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 above

Exam 3: Balance of Payments

The balance of payments identity is given by BCA + BKA + BRA = 0.Rearrange the identity for a country with a pure flexible exchange rate regime.

The "J-curve effect" shows

If Japan exports more than it imports,then

Credit entries in the U.S.balance of payments

The "one word that haunts the dollar" is

The difference between a country's savings and investment is given by

Invisible trade refers to

The balance on the reserves account (BRA),under the pure flexible exchange regime is

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

Which of the following is a true statement?

Under the fixed exchange rate regime

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

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

The current account balance is given by

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

A depreciation will begin to improve the trade balance immediately if

The current account is divided into four finer categories:

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 ≡\equiv≡ X - M ≡\equiv≡ (S - I)+ (T - G).Given this,which of the following is a true statement?

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,

The balance of payments records

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

Filters

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 $\equiv$ X - M $\equiv$ (S - I)+ (T - G).Given this,which of the following is a true statement?