Question 1

A tariff is a maximum limit on imports.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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 4

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 5

Which of the following will probably not result in an increase in a country's current account balance (assuming everything else constant)?

Accepted Answer

A)  A decrease in the country's rate of inflation 
B)  A decrease in the country's national income level 
C)  An increase in government restrictions in the form of tariffs or quotas 
D)  An appreciation of the country's currency 
E)  All of the above will result in an increased current account balance. 
A)  A decrease in the country's rate of inflation 
B)  A decrease in the country's national income level 
C)  An increase in government restrictions in the form of tariffs or quotas 
D)  An appreciation of the country's currency 
E)  All of the above will result in an increased current account balance.

Question 6

As a result of the European Union, restrictions on exports between ____ were reduced or eliminated.

Accepted Answer

A)  member countries and the U.S. 
B)  member countries 
C)  member countries and European non-members 
D)  none of the above 
A)  member countries and the U.S. 
B)  member countries 
C)  member countries and European non-members 
D)  none of the above

Question 7

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.

Accepted Answer

A)  more; lower 
B)  more; higher 
C)  less; lower 
D)  less; higher 
A)  more; lower 
B)  more; higher 
C)  less; lower 
D)  less; higher

Question 8

Assume the U.S. has a balance of trade surplus with the country of Thor. When individuals in Thor manufacture CDs and DVDs that look almost exactly like the original product produced in the U.S. and other countries, they ____ the U.S. balance of trade surplus with Thor. This activity is called ____.

Accepted Answer

A)  reduce; flipping 
B)  reduce; pirating 
C)  increase; pirating 
D)  increase; flipping 
A)  reduce; flipping 
B)  reduce; pirating 
C)  increase; pirating 
D)  increase; flipping

Question 9

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 10

____ represent aid, grants, and gifts from one country to another.

Accepted Answer

A)  Transfer payments 
B)  Factor income 
C)  The balance of trade 
D)  The balance of payments 
E)  The capital account 
A)  Transfer payments 
B)  Factor income 
C)  The balance of trade 
D)  The balance of payments 
E)  The capital account

Question 11

"Dumping" is used in the text to represent the:

Accepted Answer

A)  exporting of goods that do not meet quality standards. 
B)  sales of junk bonds to foreign countries. 
C)  removal of foreign subsidiaries by the host government. 
D)  exporting of goods at prices below cost. 
A)  exporting of goods that do not meet quality standards. 
B)  sales of junk bonds to foreign countries. 
C)  removal of foreign subsidiaries by the host government. 
D)  exporting of goods at prices below cost.

Question 12

____ 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 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

A General Agreement on Tariffs and Trade (GATT) accord in 1993 called for:

Accepted Answer

A)  increased trade restrictions outside of North America. 
B)  lower trade restrictions around the world. 
C)  uniform environmental standards around the world. 
D)  uniform worker health laws. 
A)  increased trade restrictions outside of North America. 
B)  lower trade restrictions around the world. 
C)  uniform environmental standards around the world. 
D)  uniform worker health laws.

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  inflation. 
B)  national income. 
C)  exchange rates. 
D)  tariffs. 
E)  a tax on income earned from foreign stocks. 
A)  inflation. 
B)  national income. 
C)  exchange rates. 
D)  tariffs. 
E)  a tax on income earned from foreign stocks.

Question 18

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 19

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 20

The World Bank's Multilateral Investment Guarantee Agency (MIGA):

Accepted Answer

A)  offers various forms of export insurance. 
B)  offers various forms of import insurance. 
C)  offers various forms of exchange rate risk insurance. 
D)  provides loans to developing countries. 
E)  offers various forms of political risk insurance. 
A)  offers various forms of export insurance. 
B)  offers various forms of import insurance. 
C)  offers various forms of exchange rate risk insurance. 
D)  provides loans to developing countries. 
E)  offers various forms of political risk insurance.

Exam 2: International Flow of Funds

A tariff is a maximum limit on imports.

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

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

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

Which of the following will probably not result in an increase in a country's current account balance (assuming everything else constant)?

As a result of the European Union, restrictions on exports between ____ were reduced or eliminated.

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.

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.

____ represent aid, grants, and gifts from one country to another.

"Dumping" is used in the text to represent the:

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

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

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

A General Agreement on Tariffs and Trade (GATT) accord in 1993 called for:

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.

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

The ____ is the difference between exports and imports.

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

The World Bank's Multilateral Investment Guarantee Agency (MIGA):

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

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.