Exam 2: International Flow of Funds

Without the international capital flows, there would be ____ funding available in the U.S. across all risk levels, and the cost of funding would be ____ regardless of the firm's risk level.

If the home currency begins to appreciate against other currencies, this should ____ the current account balance, other things equal (assume that substitutes are readily available in the countries, and that the prices charged by firms remain the same).

Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) between countries that do not affect the transfer of control.

Which of the following is not likely to represent a strategy by the government of Country X to reduce its balance of trade deficit with Country Y?

Direct foreign investment by U.S.-based MNCs occurs primarily in the Bahamas and Brazil.

A balance of trade surplus indicates an excess of imports over exports.

The primary component of the current account is the:

A country's net outflow of funds ____ affect its interest rates, and ____ affect its economic conditions.

If a country's government imposes a tariff on imported goods, that country's current account balance will likely ____ (assuming no retaliation by other governments).

The demand for U.S. exports tends to increase when:

Intracompany trade represents the exporting of products by one country to other countries below cost.

Which of the following countries purchases the largest amount of exports by U.S. firms?

The primary component of the capital account is the balance of trade.

The capital account reflects changes in country ownership of long-term (but not short-term) assets.

Which of the following would likely have the least direct influence on a country's current account?

An increase in the current account deficit will place ____ pressure on the home currency value, other things equal.

The World Bank extends loans only to developed nations, while the International Development Association (IDA) extends loans only to developing nations.

Over the last several years, international trade has generally:

The sale of patent rights by a U.S. firm to a Russian firm reflects a credit to the U.S. balance of payments account.

Assume that some U.S. firms will purchase supplies from either China or from U.S. firms. If the Chinese yuan appreciates against the dollar, it should reduce the U.S. balance of trade deficit with China.