Question 1

The balance of payments identity is given by BCA + BKA + BRA = 0.Rearrange the identity for a country with a pure flexible exchange rate regime.

Accepted Answer

A)  BCA + BKA + BRA = 0
B)  BCA = -BKA
C)  BCA + BKA = -BRA
D)  BRA = -BCAE) C) and D)
F) A) and B)

Question 2

A depreciation will begin to improve the trade balance immediately if

Accepted Answer

A)  imports and exports are responsive to the exchange rate changes.
B)  imports and exports are inelastic to the exchange rate changes.
C)  consumers exhibit brand loyalty and price inelasticity.
D)  b and cE) A) and B)
F) None of the above

Question 3

Which of the following is a true statement?

Accepted Answer

A)  BCA  ≡\equiv≡  X - M
B)  BKA  ≡\equiv≡  X - M
C)  BKA - BCA  ≡\equiv≡  X - M
D)  BKa  ≡\equiv≡  X - M E) A) and B)
F) A) and C)

Question 4

The "J-curve effect" shows

Accepted Answer

A)  the initial deterioration and the eventual improvement of a country's trade balance following a currency depreciation.
B)  the initial improvement and the eventual depreciation of a country's trade balance following a currency depreciation.
C)  the trade balance's lack of responsiveness to the exchanges rate changes.
D)  none of the aboveE) A) and B)
F) A) and D)

Question 5

The difference between a country's savings and investment is given by

Accepted Answer

A)  S - I
B)  I * S
C)  X - M
D)  GNP - YE) All of the above
F) A) and D)

Question 6

Under the fixed exchange rate regime

Accepted Answer

A)  the combined balance on the current and capital accounts will be equal in size, but opposite in sign, to the change in the official reserves.
B)  the balance on the current and capital accounts will be equal in size, but opposite in sign.
C)  a current account surplus or deficit must be matched by an official reserves deficit or surplus.
D)  a capital account surplus or deficit must be matched by an official reserves deficit or surplus.E) A) and B)
F) A) and C)

Question 7

In a pure flexible exchange rate regime,a country's central banks will not need to maintain official reserves.Under this regime

Accepted Answer

A)  -BCA = BKA.
B)  BCA = - BRA = 0.
C)  BKA = -BRA.
D)  BSA = BCA.E) None of the above
F) C) and D)

Question 8

Generally speaking,any transaction that results in a payment to foreigners

Accepted Answer

A)  will be recorded as a debit, with a negative sign, in the U.S.balance of payments.
B)  will be recorded as a debit, with a positive sign, in the U.S.balance of payments.
C)  will be recorded as a credit, with a negative sign, in the U.S.balance of payments.
D)  will be recorded as a credit, with a positive sign, in the U.S.balance of payments.E) None of the above
F) A) and B)

Question 9

The balance on the reserves account (BRA) ,under the pure flexible exchange regime is

Accepted Answer

A)  -$44 billion.
B)  $44 billion.
C)  $216 billion.
D)  none of the aboveE) A) and B)
F) C) and D)

Question 10

The current account is divided into four finer categories:

Accepted Answer

A)  merchandise trade, services, factor income, and statistical discrepancy.
B)  merchandise trade, services, factor income, and unilateral transfers.
C)  merchandise trade, services, portfolio investment, and unilateral transfers.
D)  merchandise trade, services, factor income, and direct investment.E) All of the above
F) None of the above

Question 11

The "one word that haunts the dollar" is

Accepted Answer

A)  (Central bank)  diversification.
B)  Reunification (Korean) .
C)  Euro.
D)  (Current account)  deficit.E) B) and D)
F) All of the above

Question 12

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures.This relationship is given by BCA  ≡\equiv≡  X - M  ≡\equiv≡  (S - I) + (T - G) .Given this,which of the following is a true statement?

Accepted Answer

A)  If (S - I)  
B)  If (T - G)  
C)  both a and b are true
D)  none of the above E) B) and C)
F) A) and B)

Question 13

The current account balance is given by

Accepted Answer

A)  C + I + G + X + M
B)  X - M
C)  I + X + M
D)  M - XE) A) and B)
F) B) and C)

Question 14

Credit entries in the U.S.balance of payments

Accepted Answer

A)  result from foreign sales of U.S.goods and services, goodwill, financial claims, and real assets.
B)  result from U.S.purchases of foreign goods and services, goodwill, financial claims, and real assets.
C)  give rise to the demand for dollars.
D)  give rise to the supply of dollars.
E)  both a and cF) D) and E)
G) A) and E)

Question 15

The balance of payments records

Accepted Answer

A)  only international trade, (exports and imports) .
B)  only cross-border investments (FDI and portfolio investment) .
C)  not only international trade, (exports and imports)  but also cross-border investments.
D)  none of the aboveE) B) and D)
F) C) and D)

Question 16

When Nestlé,a Swiss firm,bought the American firm Carnation,it was engaged in foreign direct investment.If Nestlé had only bought a non-controlling number of shares of the firm,

Accepted Answer

A)  Nestlé would have been engaged in portfolio investment.
B)  Nestlé would have been engaged in a cross-border acquisition.
C)  it would depend if they bought the shares from an American or a Canadian.
D)  none of the aboveE) C) and D)
F) B) and D)

Question 17

If Japan exports more than it imports,then

Accepted Answer

A)  the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.
B)  one can infer that the yen would be likely to appreciate against other currencies.
C)  a and b
D)  None of the aboveE) All of the above
F) C) and D)

Question 18

A country experiencing a significant balance-of-payments surplus would be likely to

Accepted Answer

A)  expand imports, offering marketing opportunities for foreign enterprises.
B)  refrain from imposing foreign exchange restrictions.
C)  expand exports, offering international marketing opportunities for domestic enterprises.
D)  Both a and bE) A) and B)
F) C) and D)

Question 19

Invisible trade refers to

Accepted Answer

A)  services that avoid tax payments.
B)  the underground economy.
C)  legal, consulting, and engineering services.
D)  tourist expenditures, only.E) B) and D)
F) B) and C)

Question 20

When a country must make a net payment to foreigners because of a balance-of-payments deficit,the central bank of the country

Accepted Answer

A)  should do nothing.
B)  should run down its official reserve assets (e.g.gold, foreign exchanges, and SDRs) .
C)  should borrow anew from foreign central banks.
D)  either b)  or c)  will work.E) B) and D)
F) C) and D)

Exam 3: Balance of Payments

The balance of payments records

Correct AnswerverifiedShow Answer

When Nestlé,a Swiss firm,bought the American firm Carnation,it was engaged in foreign direct investment.If Nestlé had only bought a non-controlling number of shares of the firm,

Correct AnswerverifiedShow Answer

The current account is divided into four finer categories:

Correct AnswerverifiedShow Answer

The "one word that haunts the dollar" is

Correct AnswerverifiedShow Answer

The balance on the reserves account (BRA) ,under the pure flexible exchange regime is

Correct AnswerverifiedShow Answer

When a country must make a net payment to foreigners because of a balance-of-payments deficit,the central bank of the country

Correct AnswerverifiedShow Answer

If Japan exports more than it imports,then

Correct AnswerverifiedShow Answer

The "J-curve effect" shows

Correct AnswerverifiedShow Answer

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures.This relationship is given by BCA ≡\equiv≡ X - M ≡\equiv≡ (S - I) + (T - G) .Given this,which of the following is a true statement?

Correct AnswerverifiedShow Answer

A country experiencing a significant balance-of-payments surplus would be likely to

Correct AnswerverifiedShow Answer

Generally speaking,any transaction that results in a payment to foreigners

Correct AnswerverifiedShow Answer

The difference between a country's savings and investment is given by

Correct AnswerverifiedShow Answer

A depreciation will begin to improve the trade balance immediately if

Correct AnswerverifiedShow Answer

Invisible trade refers to

Correct AnswerverifiedShow Answer

Under the fixed exchange rate regime

Correct AnswerverifiedShow Answer

The balance of payments identity is given by BCA + BKA + BRA = 0.Rearrange the identity for a country with a pure flexible exchange rate regime.

Correct AnswerverifiedShow Answer

Which of the following is a true statement?

Correct AnswerverifiedShow Answer

In a pure flexible exchange rate regime,a country's central banks will not need to maintain official reserves.Under this regime

Correct AnswerverifiedShow Answer

The current account balance is given by

Correct AnswerverifiedShow Answer

Credit entries in the U.S.balance of payments

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

There is an intimate relationship between a country's BCA and how the country finances its domestic investment and pays for government expenditures.This relationship is given by BCA $\equiv$ X - M $\equiv$ (S - I) + (T - G) .Given this,which of the following is a true statement?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified