Question 1

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 above 
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 above C

Question 2

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. A

Question 3

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 A

Question 4

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 5

The difference between Foreign Direct Investment and Portfolio Investment is that

Accepted Answer

A) Portfolio Investment mostly represents the sale and purchase of foreign financial assets such as stocks and bonds that do not involve a transfer of control. 
B) Foreign Direct Investment mostly represents the sale and purchase of foreign financial assets such as stocks whereas Portfolio Investment mostly involves the sales and purchase of foreign bonds. 
C) Foreign Direct Investment is about buying land and building factories, whereas portfolio investment is about buying stocks and bonds. 
D) All of the above 
A) Portfolio Investment mostly represents the sale and purchase of foreign financial assets such as stocks and bonds that do not involve a transfer of control. 
B) Foreign Direct Investment mostly represents the sale and purchase of foreign financial assets such as stocks whereas Portfolio Investment mostly involves the sales and purchase of foreign bonds. 
C) Foreign Direct Investment is about buying land and building factories, whereas portfolio investment is about buying stocks and bonds. 
D) All of the above

Question 6

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 7

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 8

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.

Question 9

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) Both a and b 
D) None of the above 
A) impose measures to restrict imports. 
B) impose measures to discourage capital outflows. 
C) Both a and b 
D) None of the above

Question 10

If the central banks of the world chose to diversify their foreign-exchange reserves away from the dollar and into the euro,

Accepted Answer

A) this would have the result of a strengthening of the value of the dollar. 
B) this have the result of a weakening in the value of the dollar. 
C) this would not have much impact, as the information would be lost in the day-to-day volatility of exchange rates. 
A) this would have the result of a strengthening of the value of the dollar. 
B) this have the result of a weakening in the value of the dollar. 
C) this would not have much impact, as the information would be lost in the day-to-day volatility of exchange rates.

Question 11

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 above 
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 above

Question 12

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 13

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 14

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 15

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 16

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 17

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 18

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 19

If the United States imports more than it exports, then this means that

Accepted Answer

A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. 
B) the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus. 
C) the U.S. dollar would be under pressure to appreciate against other currencies. 
D) both b and c are correct 
A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. 
B) the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus. 
C) the U.S. dollar would be under pressure to appreciate against other currencies. 
D) both b and c are correct

Question 20

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

Exam 3: Balance of Payments

The U.S. Trade Deficit

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

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

The economic theory of mercantilism holds that

The difference between Foreign Direct Investment and Portfolio Investment is that

The factors of production are

The "one word that haunts the dollar" is

BCA stands for

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

If the central banks of the world chose to diversify their foreign-exchange reserves away from the dollar and into the euro,

Factor income

National income, or Gross National Product is given by

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

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

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

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

Current account includes

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

If the United States imports more than it exports, then this means that

Since security returns tend to have low correlations among countries,

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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