Exam 3: The Balance of Payments

Which of the following statements about the balance of payments is NOT true?

What is a country's balance of (merchandise)trade,and why is it so widely reported in the financial and popular press?

Which of the following is NOT part of the Financial Account of the BOP?

When categorizing investments for the financial account component of the balance of payments the ________ is an investment where the investor has no control whereas the ________ is an investment where the investor has control over the asset.

Balance of payment (BOP)data may be important for any of the following reasons:

An American tourist purchases a leather jacket while in Italy.Which of the following statements is true?

The balance of payments:

China's current political plan includes reducing their foreign exchange reserve balance by allowing the yuan to float freely and by switching their goods balance from one of a net surplus to a net deficit.

The authors identify a tip for understanding BOP accounting.They recommend that you "follow the cash flow."

In the United States and most developed countries,the current account and the combined financial/capital accounts tend to be inversely related in that when one is positive,the other tends to be negative.

This was an era dominated by industrialized nation economies that were dependent on gold convertibility to maintain confidence in the system.

An era of retrenchment,in which major economic powers returned to policies of isolationism and protectionism,restricting trade and nearly eliminating capital mobility.

Which of the following international transactions would NOT be counted as a balance of payments (BOP)transaction?

The immediate impact of a devaluation of the domestic currency is to decrease the value of the spot exchange rate S^$/fc.

This dollar-based fixed exchange rate system gave rise to a long period of economic recovery and growing openness of both international trade and capital flows in and out of more and more countries.

Which of the following is NOT part of the balance of payments account?

What is the Official Reserves Account (ORA),and why is it more important for countries under a fixed exchange rate regime than for ones under a floating exchange rate regime?

Of the following,which is NOT a part of J-Curve adjustment path?

The financial account consists COMPLETELY of which four components?

Very often governments seek to alter the market's valuation of their currency by influencing relative interest rates,thus influencing the economic fundamentals of exchange rate determination rather than through direct intervention in the foreign exchange markets.Describe how this strategy works.Describe the case of the U.S.or China where the opposite effect,to the suggest here,have occurred.