Question 1

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

Accepted Answer

A)  services trade. 
B)  income trade. 
C)  goods trade. 
D)  current transfers.

Question 2

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

Accepted Answer

A)  surplus; contract 
B)  deficit; contract 
C)  deficit; expand 
D)  none of the above

Question 3

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

Accepted Answer

A)  net foreign direct investment 
B)  net import/export of services 
C)  net portfolio investment 
D)  other Financial items

Question 4

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

Accepted Answer

The answer of What is a country's balance of (merchandise)...

Question 5

Assume that a country is experiencing a balance of trade deficit and then suffers a rapid depreciation of its currency. J-curve theory suggests that the trade balance will adjust in three distinct periods in the following order

Accepted Answer

A)  quantity adjustment period; pass-through period; currency contract period. 
B)  pass-through period; currency contract period; quantity adjustment period. 
C)  currency contract period; pass-through period; quantity adjustment period. 
D)  pass-through period; quantity adjustment period; currency contract period.

Question 6

Your authors identify five primary mechanisms by which capital may be moved from one country to another. Identify and briefly explain/define three of those methods.

Accepted Answer

The answer of Your authors identify five primary mechanisms by...

Question 7

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?

Accepted Answer

The answer of What is the Official Reserves Account (ORA)...

Question 8

The balance of payments is most like a(an)

Accepted Answer

A)  cash flow statement. 
B)  balance sheet. 
C)  income statement. 
D)  proxy statement.

Question 9

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

Accepted Answer

A)  the amount still owed by an exporting firm after making an initial down payment. 
B)  the amount still owed by governments to the International Monetary Fund. 
C)  the measurement of all international economic transactions between the residents of a country and foreign residents. 
D)  the amount of a country's merchandise trade deficit or surplus.

Question 10

The United States experienced a balance of trade ________ during the 1990s and a balance of trade ________ during the 2000s.

Accepted Answer

A)  surplus; surplus 
B)  surplus; deficit 
C)  deficit; deficit 
D)  deficit; surplus

Question 11

The time from 1971 to today has predominately used a regime of variable exchange rates. It has also seen a decrease in capital mobility.

Accepted Answer

A) True 
 B)False

Question 12

Under an international regime of fixed exchange rates, countries with a BOP ________ should consider ________ their currency while countries with a BOP ________ should consider ________ their currency.

Accepted Answer

A)  deficit; revaluing; surplus; revaluing 
B)  deficit; devaluing; surplus; devaluing 
C)  surplus; devaluing; deficit; revaluing 
D)  surplus; revaluing; deficit; devaluing

Question 13

Which of the following is NOT an example of an exchange of financial assets?

Accepted Answer

A)  the exchange of travel services 
B)  the exchange of stocks 
C)  the exchange of bonds 
D)  loans

Question 14

The ________ of the balance of payments measures all international economic transactions of financial assets.

Accepted Answer

A)  current account 
B)  merchandise trade account 
C)  services account 
D)  capital/financial account

Question 15

In 2001 the United States posted a current account deficit of -$393 billion. The bulk of the negative value came from

Accepted Answer

A)  a net transfer deficit. 
B)  an income balance deficit. 
C)  a goods trade deficit. 
D)  an income trade deficit.

Question 16

The role of official reserves is ________ under a ________ exchange rate regime.

Accepted Answer

A)  enhanced; floating 
B)  diminished; fixed 
C)  enhanced; fixed 
D)  None of the above apply.

Question 17

Ordinarily countries will demonstrate an inverse relationship between their current and financial accounts. A surplus in one will usually result in a deficit in the other.

Accepted Answer