Exam 3: The Balance of Payments

Imports have the potential to lower a country's inflation rate.In particular,imports of HIGHER-priced goods and services place a limit on what domestic competitors charge for comparable goods and services.

The balance of payments as applied to a course in international finance may be defined as:

In general there is consensus that ________ should be free,but there is no such consensus that ________ should be free.

Which of the following is NOT an item to be considered in BOP calculations?

Use the following terms for this question: (X-M)= Current Account Balance (CI-CO)= Capital Account Balance (FI-FO)= Financial Account Balance (I-S)= Investment-Saving Balance FXB = Reserve Balance BOP = balance of payments GDP = gross domestic product C = consumption I = capital investment spending G = government spending The static equation for the BOP is:

The two major concerns about foreign direct investment are:

A ________ is any restriction that limits or alters the rate or direction of capital movement into or out of a country.

If China wished to reduce their accumulation of foreign exchange reserves they could:

One of the motivations for capital controls is to insulate an economy from foreign political risks.

When a currency is devalued the immediate impact may be an increase in a country's trade deficit.However,this situation tends to correct itself in 2 to 5 weeks.

If your company were to import and export textiles,the transactions would be recorded in the current account subcategory of:

The authors identify four distinct periods of capital mobility since 1860.Which do they term as a "period of global economic destruction"?

________ is the cross-border purchase of assets that are then managed in a way that hides the movement of money and its ownership.

The biggest problem that China faces in maintaining a stable value for their currency,the yuan,is their lack of foreign exchange reserves.

The subcategory that typically dominates the current account is:

A country experiencing a serious BOT ________ is more likely to ________ exports than otherwise.

The travel services provided to international travelers by United Airlines would be recorded in the current account subcategory of:

Which of the following would NOT be considered a typical BOP transaction?

Longer-term capital flows reflect short-term interest rate differentials and exchange rate expectations.

The effect of an imbalance in the BOP is the same for countries on a fixed exchange rate regime as for those on a floating exchange rate regime.