Question 1

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

Question 2

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 3

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 4

International reserve assets include "foreign exchanges". These are

Accepted Answer

A) Special Drawing Rights (SDRs) at the IMF. 
B) reserve positions in the International Monetary Fund (IMF). 
C) foreign currency held by a country's central bank. 
D) none of the above 
A) Special Drawing Rights (SDRs) at the IMF. 
B) reserve positions in the International Monetary Fund (IMF). 
C) foreign currency held by a country's central bank. 
D) none of the above

Question 5

If the United States imports more than it exports, 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 U.S. dollar would be under pressure to depreciate 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 U.S. dollar would be under pressure to depreciate against other currencies. 
C) a and b 
D) None of the above

Question 6

When Honda, a Japanese auto maker, built a factory in Ohio,

Accepted Answer

A) it was engaged in foreign direct investment. 
B) it was engaged in portfolio investment. 
C) it was engaged in a cross-border acquisition. 
D) none of the above. 
A) it was engaged in foreign direct investment. 
B) it was engaged in portfolio investment. 
C) it was engaged in a cross-border acquisition. 
D) none of the above.

Question 7

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 8

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 9

Among IMF member countries, the dollar's dominant position in the world's reserve holdings may decline to a certain extent as the euro becomes a "known quantity" and its external value becomes more stable. In fact, the euro's share has increased

Accepted Answer

A) from zero percent in 1999 to 25.8 percent in 2006. 
B) from 13.5 percent in 1999 to 25.8 percent in 2006. 
C) from 13.5 percent in 1999 to 52.8 percent in 2006. 
D) none of the above 
A) from zero percent in 1999 to 25.8 percent in 2006. 
B) from 13.5 percent in 1999 to 25.8 percent in 2006. 
C) from 13.5 percent in 1999 to 52.8 percent in 2006. 
D) none of the above

Question 10

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 11

Currently, international reserve assets are comprised of

Accepted Answer

A) gold, platinum, foreign exchanges, and special drawing rights (SDRs). 
B) gold, foreign exchanges, special drawing rights (SDRs), and reserve positions in the International Monetary Fund (IMF). 
C) gold, diamonds, foreign exchanges, and special drawing rights (SDRs). 
D) reserve positions in the International Monetary Fund (IMF), only. 
A) gold, platinum, foreign exchanges, and special drawing rights (SDRs). 
B) gold, foreign exchanges, special drawing rights (SDRs), and reserve positions in the International Monetary Fund (IMF). 
C) gold, diamonds, foreign exchanges, and special drawing rights (SDRs). 
D) reserve positions in the International Monetary Fund (IMF), only.

Question 12

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 13

The balance on the reserves account (BRA), under the fixed 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 14

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 15

The current 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

Question 16

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 above 
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 above

Question 17

The official reserve 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

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. Given this, in order for a country to reduce a BCA deficit, which of the following must occur?

Accepted Answer

A) For a given level of S and I, the government budget deficit (T - G) must be reduced. 
B) For a given level of I and (T - G), S must be increased. 
C) For a given level of S and (T - G), I must fall. 
D) All of the above would work to reduce a BCA deficit. 
A) For a given level of S and I, the government budget deficit (T - G) must be reduced. 
B) For a given level of I and (T - G), S must be increased. 
C) For a given level of S and (T - G), I must fall. 
D) All of the above would work to reduce a BCA deficit.

Question 19

The most important international reserve asset, comprising 94 percent of the total reserve assets held by IMF member countries is

Accepted Answer

A) gold. 
B) foreign exchanges. 
C) special Drawing Rights (SDRs). 
D) reserve positions in the International Monetary Fund (IMF). 
A) gold. 
B) foreign exchanges. 
C) special Drawing Rights (SDRs). 
D) reserve positions in the International Monetary Fund (IMF).

Question 20

Transactions in currency, bank deposits and so forth

Accepted Answer

A) tend to be insensitive to both changes in relative interest rates and the anticipated change in exchange rate. 
B) tend to be sensitive to both changes in relative interest rates and the anticipated change in exchange rate. 
C) tend to be sensitive to changes in relative interest rates but insensitive to the anticipated change in exchange rate. 
D) tend to be insensitive to changes in relative interest rates but sensitive to the anticipated change in exchange rate. 
A) tend to be insensitive to both changes in relative interest rates and the anticipated change in exchange rate. 
B) tend to be sensitive to both changes in relative interest rates and the anticipated change in exchange rate. 
C) tend to be sensitive to changes in relative interest rates but insensitive to the anticipated change in exchange rate. 
D) tend to be insensitive to changes in relative interest rates but sensitive to the anticipated change in exchange rate.

Exam 3: Balance of Payments

The capital account includes

Invisible trade refers to

A currency depreciation will begin to improve the trade balance immediately

International reserve assets include "foreign exchanges". These are

If the United States imports more than it exports, then

When Honda, a Japanese auto maker, built a factory in Ohio,

The current account balance is given by

If for a particular county an increase in the interest rate is more or less matched by an expected depreciation in the local currency,

Among IMF member countries, the dollar's dominant position in the world's reserve holdings may decline to a certain extent as the euro becomes a "known quantity" and its external value becomes more stable. In fact, the euro's share has increased

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

Currently, international reserve assets are comprised of

The "J-curve effect" shows

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

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 current account includes

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

The official reserve account includes

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, in order for a country to reduce a BCA deficit, which of the following must occur?

The most important international reserve asset, comprising 94 percent of the total reserve assets held by IMF member countries is

Transactions in currency, bank deposits and so forth

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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