Question 1

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

Question 2

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 3

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

Accepted Answer

A) True 
 B)False

Question 4

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 are 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 are responsible for converting trade surpluses and oil revenues into foreign exchange reserves. 
D) none of the above

Question 5

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 6

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 above 
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 above

Question 7

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 8

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) 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 9

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 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 10

As of 2011 gold accounted for

Accepted Answer

A) 90 percent of the total reserve assets held by IMF member countries. 
B) 70 percent of the total reserve assets held by IMF member countries. 
C) approximately 50 percent of the total reserve assets held by IMF member countries. 
D) less than one percent of the total reserve assets held by IMF member countries. 
A) 90 percent of the total reserve assets held by IMF member countries. 
B) 70 percent of the total reserve assets held by IMF member countries. 
C) approximately 50 percent of the total reserve assets held by IMF member countries. 
D) less than one percent of the total reserve assets held by IMF member countries.

Question 11

The capital account is divided into three subcategories: direct investment, portfolio investment, and other investment. Portfolio 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 12

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 13

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) When BCA is negative, it implies that government budget deficits an/or part of domestic investment are being finance with foreign-controlled capital. 
D) All of the above are true 
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) When BCA is negative, it implies that government budget deficits an/or part of domestic investment are being finance with foreign-controlled capital. 
D) All of the above are true

Question 14

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 15

The most popular reserve currency is now the

Accepted Answer

A) U.S. dollar. 
B) Euro. 
C) Japanese Yen. 
A) U.S. dollar. 
B) Euro. 
C) Japanese Yen.

Question 16

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures. 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) When BCA is negative, it implies that government budget deficits an/or part of domestic investment are being finance with foreign-controlled capital. 
D) All of the above are true. 
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) When BCA is negative, it implies that government budget deficits an/or part of domestic investment are being finance with foreign-controlled capital. 
D) All of the above are true.

Question 17

More important than he absolute size of a country's balance-of-payments disequilibrium

Accepted Answer

A) is the nature and cause of the disequilibrium. 
B) is whether it is a trade surplus or deficit. 
C) is whether the local government is mercantilist or not. 
D) Nothing is more important than he absolute size of a country's balance-of-payments disequilibrium. 
A) is the nature and cause of the disequilibrium. 
B) is whether it is a trade surplus or deficit. 
C) is whether the local government is mercantilist or not. 
D) Nothing is more important than he absolute size of a country's balance-of-payments disequilibrium.

Question 18

The central bank of the United States is

Accepted Answer

A) the New York Fed. 
B) the Federal Reserve System. 
C) the EXIM bank. 
D) none of the above-the U.S. does not have a central bank. 
A) the New York Fed. 
B) the Federal Reserve System. 
C) the EXIM bank. 
D) none of the above-the U.S. does not have a central bank.

Question 19

A country's international transactions can be grouped into the following three main types:

Accepted Answer

A) current account, medium term account, and long term capital account. 
B) current account, long term capital account, and official reserve account. 
C) current account, capital account, and official reserve account. 
D) capital account, official reserve account, trade account. 
A) current account, medium term account, and long term capital account. 
B) current account, long term capital account, and official reserve account. 
C) current account, capital account, and official reserve account. 
D) capital account, official reserve account, trade account.

Question 20

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.

Exam 3: Balance of Payments

The balance of payments records

Credit entries in the U.S. balance of payments

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

Government controlled investment funds, known as sovereign wealth funds,

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

Statistical discrepancy, which by definition represents errors and omissions

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

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

As of 2011 gold accounted for

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

A depreciation will begin to improve the trade balance immediately if

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?

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

The most popular reserve currency is now the

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures. Given this, which of the following is a true statement?

More important than he absolute size of a country's balance-of-payments disequilibrium

The central bank of the United States is

A country's international transactions can be grouped into the following three main types:

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

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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