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125.320 International Finance Balance Of Payments Massey University

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Massey University

125.320 International Finance Balance Of Payments Massey University

1) Over half of all dollar bills in circulation are held outside American’s borders.
2) The current account balance, which is the difference between a country’s exports and imports,
is a component of the country’s GNP. Other components of GNP include
A) consumption and investment and government expenditure.
B) consumption and government expenditure and net exports.
C) consumption and net exports and government expenditure.
D) consumption less imports.
3) If the United States imports more than it exports, then this means that
A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris
paribus.
B) the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris
paribus.
C) the U.S. dollar would be under pressure to appreciate against other currencies.
D) the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris
paribus, and the U.S. dollar would be under pressure to appreciate against other currencies.
4) Balance of payments
A) is defined as the statistical record of a country’s international transactions over a certain
period of time presented in the form of a double-entry bookkeeping.
B) provides detailed information concerning the demand and supply of a country’s currency.
C) can be used to evaluate the performance of a country in international economic competition.
D) all of the options
5) If a country is grappling with a major balance-of-payment difficulty, it may not be able to
expand imports from the outside world. Instead, the country may be tempted to
A) impose measures to restrict imports.
B) impose measures to discourage capital outflows.
C) impose measures to restrict imports and discourage capital outflows.
D) none of the options
6) If the United States imports more than it exports, then
A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris
paribus.
B) one can infer that the U.S. dollar would be under pressure to depreciate against other
currencies.
C) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris
paribus, and one can infer that the U.S. dollar would be under pressure to depreciate against
other currencies.
D) none of the options
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7) Generally speaking, any transaction that results in a receipt from foreigners
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.
8) Generally speaking, any transaction that results in a payment to foreigners
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.
9) If Japan exports more than it imports, then
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) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris
paribus, and one can infer that the yen would be likely to appreciate against other currencies.
D) none of the options
10) The balance of payments records
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 options
11) Credit entries in the U.S. balance of payments
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) result from foreign sales of U.S. goods and services, goodwill, financial claims, and real
assets, and give rise to the demand for dollars.
12) A country experiencing a significant balance-of-payments surplus would be likely to
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) expand imports, offering marketing opportunities for foreign enterprises, and refrain from
imposing foreign exchange restrictions.
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13) Suppose the McDonalds Corporation imports Canadian beef, paying for it by transferring the
funds to a New York bank account kept by the Canadian beef producer.
A) Payment by McDonalds will be recorded as a debit.
B) The deposit of the funds by the seller will be recorded as a debit.
C) Payment by McDonalds will be recorded as a credit.
D) The deposit of the funds by the buyer will be credit.
14) Since the balance of payments is presented as a system of double-entry bookkeeping,
A) every credit in the account is balanced by a matching debit.
B) every debit in the account is balanced by a matching credit.
C) every credit in the account is balanced by a matching debit and every debit in the account is
balanced by a matching credit.
D) none of the options
15) Suppose the InBev Corporation (a non-U.S. MNC) buys the Anheuser-Busch Corporation,
paying the U.S. shareholders cash.
A) Payment by InBev will be recorded as a debit.
B) The deposit of the funds by the sellers will be recorded as a debit.
C) Payment by InBev will be recorded as a credit.
D) The deposit of the funds by the buyer will be credit.
16) The current account includes
A) the export and import of goods and services.
B) all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and
businesses.
C) all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold,
and special drawing rights (SDRs).
D) none of the options
17) A country with a current account surplus
A) acquires IOUs from foreigners, thereby increasing its net foreign wealth.
B) must borrow from foreigners or draw down on its previously accumulated foreign wealth.
C) will experience a reduction in the country’s net foreign wealth.
D) must borrow from foreigners or draw down on its previously accumulated foreign wealth and
will experience a reduction in the country’s net foreign wealth.
18) The capital account includes
A) the export and import of goods and services.
B) all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and
businesses.
C) all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold,
and special drawing rights (SDRs).
D) none of the options
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19) The official reserve account includes
A) the export and import of goods and services.
B) all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and
businesses.
C) all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold,
and special drawing rights (SDRs).
D) none of the options
20) A country’s international transactions can be grouped into the following three main types:
A) current account, medium term account, and long term capital account.
B) current account, long term capital account, and official reserve account.
C) current account, capital account, and official reserve account.
D) capital account, official reserve account, trade account.
21) Invisible trade refers to
A) services that avoid tax payments.
B) the underground economy.
C) legal, consulting, and engineering services.
D) tourist expenditures only.
22) A country that gives foreign aid to another country can be viewed as
A) importing goodwill from the latter.
B) exporting goodwill to the latter.
23) In 2012, the United States had a current account deficit. The current account deficit implies
that the United States
A) had a surplus on legal consulting and engineering services.
B) produced more output than it consumed.
C) consumed more output than it produced.
D) none of the options
24) The current account is divided into four finer categories:
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.
25) The factors of production are
A) land, labor, capital, and entrepreneurial ability.
B) interest, wages and dividends.
C) payments and receipts of interest, dividends, and other income on foreign investments that
were previously made.
D) none of the options

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125.320 International Finance Balance Of Payments Massey University

 

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