Question 1

A weak home currency may not be a perfect solution to correct a balance of trade deficit because:

Accepted Answer

A)  it reduces the prices of imports paid by local companies. 
B)  it increases the prices of exports by local companies. 
C)  it prevents international trade transactions from being prearranged. 
D)  foreign companies may reduce the prices of their products to stay competitive. 
A)  it reduces the prices of imports paid by local companies. 
B)  it increases the prices of exports by local companies. 
C)  it prevents international trade transactions from being prearranged. 
D)  foreign companies may reduce the prices of their products to stay competitive.

Question 2

U.S. government officials would likely prefer that China devalue the yuan against the dollar.

Accepted Answer

A) True 
 B)False

Question 3

A tariff is a maximum limit on imports.

Accepted Answer

A) True 
 B)False

Question 4

A weakening of the U.S. dollar with respect to the British pound would likely reduce the U.S. exports to Britain and increase U.S. imports from Britain over time.

Accepted Answer

A) True 
 B)False

Question 5

Regarding the U.S. balance of payments, capital account items are relatively minor compared to the financial account items.

Accepted Answer

A) True 
 B)False

Question 6

____ purchases more U.S. exports than the other countries listed here.

Accepted Answer

A)  Italy 
B)  Spain 
C)  Mexico 
D)  Canada 
A)  Italy 
B)  Spain 
C)  Mexico 
D)  Canada

Question 7

Which is not a concern about the North American Free Trade Agreement (NAFTA)?

Accepted Answer

A)  its impact on U.S. inflation. 
B)  its impact on U.S. unemployment. 
C)  lower environmental standards in Mexico. 
D)  different health laws for workers in Mexico. 
A)  its impact on U.S. inflation. 
B)  its impact on U.S. unemployment. 
C)  lower environmental standards in Mexico. 
D)  different health laws for workers in Mexico.

Question 8

Direct foreign investment into the U.S. represents a ____.

Accepted Answer

A)  capital inflow 
B)  trade inflow 
C)  capital outflow 
D)  trade outflow 
A)  capital inflow 
B)  trade inflow 
C)  capital outflow 
D)  trade outflow

Question 9

The ____ is the difference between exports and imports.

Accepted Answer

A)  balance of trade 
B)  balance on goods and services 
C)  balance of payments 
D)  current account 
E)  capital account 
A)  balance of trade 
B)  balance on goods and services 
C)  balance of payments 
D)  current account 
E)  capital account

Question 10

Also known as the "central banks' central bank," the ____ attempts to facilitate cooperation among countries with regard to international transactions and provides assistance to countries experiencing a financial crisis.

Accepted Answer

A)  World Bank 
B)  International Financial Corporation (IF
C)  
C)  World Trade Organization 
D)  International Development Association (ID
A)  
E)  Bank for International Settlements (BIS) 
A)  World Bank 
B)  International Financial Corporation (IF
C)  
C)  World Trade Organization 
D)  International Development Association (ID
A)  
E)  Bank for International Settlements (BIS)

Question 11

An American tourist visiting Germany and spending money there (for lodging, food, etc.) will reduce the U.S. current account deficit and reduce Germany's current account balance.

Accepted Answer

A) True 
 B)False

Question 12

The U.S. typically has a balance of trade surplus in its trade with ____.

Accepted Answer

A)  China 
B)  Japan 
C)  A and B 
D)  none of the above 
A)  China 
B)  Japan 
C)  A and B 
D)  none of the above

Question 13

The balance of payments is a measurement of all transactions between domestic and foreign residents over a specified period of time.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following factors probably does not directly affect a country's capital account and its components?

Accepted Answer

A)  Inflation 
B)  Interest rates 
C)  Withholding taxes on foreign income 
D)  Exchange rate movements 
E)  All of the above will directly affect a country's capital account. 
A)  Inflation 
B)  Interest rates 
C)  Withholding taxes on foreign income 
D)  Exchange rate movements 
E)  All of the above will directly affect a country's capital account.

Question 15

____ is (are) income received by investors on foreign investments in financial assets (securities).

Accepted Answer

A)  Portfolio income 
B)  Direct foreign income 
C)  Unilateral transfers 
D)  Factor income 
A)  Portfolio income 
B)  Direct foreign income 
C)  Unilateral transfers 
D)  Factor income

Question 16

The ____, an accord among 117 nations, called for lower tariffs around the world.

Accepted Answer

A)  General Agreement on Tariffs and Trade (GATT) 
B)  North American Free Trade Agreement (NAFT
A)  
C)  Single European Act of 1987 
D)  European Union Accord 
E)  None of the above 
A)  General Agreement on Tariffs and Trade (GATT) 
B)  North American Free Trade Agreement (NAFT
A)  
C)  Single European Act of 1987 
D)  European Union Accord 
E)  None of the above

Question 17

Changes in country ownership of long-term and short-term assets are measured in the balance of payments with the capital account.

Accepted Answer

A) True 
 B)False

Question 18

According to the text, international trade (exports plus imports combined) as a percentage of GDP is:

Accepted Answer

A)  higher in the U.S. than in European countries. 
B)  lower in the U.S. than in European countries. 
C)  higher in the U.S. than in about half the European countries, and lower in the U.S. than the others. 
D)  about the same in the U.S. as in European countries. 
A)  higher in the U.S. than in European countries. 
B)  lower in the U.S. than in European countries. 
C)  higher in the U.S. than in about half the European countries, and lower in the U.S. than the others. 
D)  about the same in the U.S. as in European countries.

Question 19

The World Bank frequently enters into cofinancing agreements. Under these agreements, financing is provided by the World Bank and/or official aid agencies, export credit agencies, or commercial banks.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 2: International Flow of Funds

A weak home currency may not be a perfect solution to correct a balance of trade deficit because:

U.S. government officials would likely prefer that China devalue the yuan against the dollar.

A tariff is a maximum limit on imports.

A weakening of the U.S. dollar with respect to the British pound would likely reduce the U.S. exports to Britain and increase U.S. imports from Britain over time.

Regarding the U.S. balance of payments, capital account items are relatively minor compared to the financial account items.

____ purchases more U.S. exports than the other countries listed here.

Which is not a concern about the North American Free Trade Agreement (NAFTA)?

Direct foreign investment into the U.S. represents a ____.

The ____ is the difference between exports and imports.

Also known as the "central banks' central bank," the ____ attempts to facilitate cooperation among countries with regard to international transactions and provides assistance to countries experiencing a financial crisis.

An American tourist visiting Germany and spending money there (for lodging, food, etc.) will reduce the U.S. current account deficit and reduce Germany's current account balance.

The U.S. typically has a balance of trade surplus in its trade with ____.

The balance of payments is a measurement of all transactions between domestic and foreign residents over a specified period of time.

Which of the following factors probably does not directly affect a country's capital account and its components?

____ is (are) income received by investors on foreign investments in financial assets (securities).

The ____, an accord among 117 nations, called for lower tariffs around the world.

Changes in country ownership of long-term and short-term assets are measured in the balance of payments with the capital account.

According to the text, international trade (exports plus imports combined) as a percentage of GDP is:

The World Bank frequently enters into cofinancing agreements. Under these agreements, financing is provided by the World Bank and/or official aid agencies, export credit agencies, or commercial banks.

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

Multinational Financial Management: An Overview

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters