Question 1

Which of the following is NOT part of the balance of payments account?

Accepted Answer

A)  The current account.
B)  The financial/capital account.
C)  The official reserves account.
D)  All of the above are BOP accounts.E) None of the above
F) A) and C)

Question 2

The ________ includes all international economic transactions with income or payment flows occurring within the year.

Accepted Answer

A)  capital account
B)  current account
C)  financial account
D)  IMF accountE) B) and D)
F) B) and C)

Question 3

Expenditures by U.S. tourists in foreign countries for foreign goods or services are factored into BOP calculations.

Accepted Answer

A)  True
B)  FalseC) A) and B)
D) undefined

Question 4

In general, as a country's income increases, so does the demand for imports.

Accepted Answer

A)  True
B)  FalseC) A) and B)
D) undefined

Question 5

In general there is consensus that ________ should be free but there is no such consensus that ________ should be free.

Accepted Answer

A)  international investment; international goods trade
B)  international investment; international trade
C)  international trade; international goods trade
D)  international trade; international investmentE) B) and C)
F) All of the above

Question 6

________ is the cross-border purchase of assets that are then managed in a way that hides the movement of money and its ownership.

Accepted Answer

A)  Capital flight
B)  Capital mobility
C)  Irrational exuberance
D)  Money launderingE) A) and C)
F) All of the above

Question 7

Imports have the potential to lower a country's inflation rate because of each of the following EXCEPT:

Accepted Answer

A)  the import of lower priced goods limits what domestic competitors can charge for goods.
B)  the import of lower priced services limits what domestic competitors can charge for services.
C)  the higher prices of foreign goods spurs domestic competitors to cut prices.
D)  of all of the aboveE) B) and D)
F) B) and C)

Question 8

The two major concerns about foreign direct investment are:

Accepted Answer

A)  national defense and taxes.
B)  who controls the assets and who receives the profits.
C)  who receives the profits and taxes.
D)  who pays the taxes and who receives the taxes.E) B) and C)
F) None of the above

Question 9

When categorizing investments for the financial account component of the balance of payments the ________ is an investment where the investor has no control whereas the ________ is an investment where the investor has control over the asset.

Accepted Answer

A)  direct investment; portfolio investment
B)  direct investment; indirect investment
C)  portfolio investment; indirect investment
D)  portfolio investment; direct investmentE) B) and D)
F) C) and D)

Question 10

The subcategory that typically dominates the current account is ________.

Accepted Answer

A)  goods (merchandise) trade
B)  services trade
C)  income trade
D)  transfer accountsE) A) and D)
F) A) and C)

Question 11

In 2007 the United States posted a current account deficit of -$731 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.E) C) and D)
F) A) and D)

Question 12

The BOP should always balance.

Accepted Answer

A)  True
B)  FalseC) A) and B)
D) undefined

Question 13

Balance of payment (BOP) data may be important for any of the following reasons:

Accepted Answer

A)  BOP data helps to forecast a country's market potential, especially in the short run.
B)  The BOP is an important indicator of a country's foreign exchange rate.
C)  Changes in a country's BOP may signal a change in controls over payment of dividends and interest.
D)  all of the aboveE) B) and C)
F) A) and C)

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 accountE) B) and D)
F) B) and C)

Question 15

Because current and financial/capital account balances use double-entry bookkeeping it is unusual to find serious discrepancies in the debits and credits.

Accepted Answer

A)  True
B)  FalseC) A) and B)
D) undefined

Question 16

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 ORA is the total reserves held by of...

Question 17

Anaconda Copper Inc. created a subsidiary in Chile last year to mine copper ore. The proportion of net income paid back to the parent company as a dividend would be recorded in the current account subcategory of ________.

Accepted Answer

A)  services trade
B)  income trade
C)  goods trade
D)  current transfersE) B) and D)
F) A) and B)

Question 18

Use the following terms for this question: C = consumption
I = capital investment spending
G = government spending
X = exports of goods and services
M = imports of goods and services
BOP = balance of payments
GDP = gross domestic product
NPV = net present value
INF = inflation
R = real rate of return
The static equation for the nations GDP is:

Accepted Answer

A)  GDP = C + I + G + (X + M ) x INF
B)  GDP = C + I + G + X + M
C)  GDP = C + I + G + X - M
D)  GDP = C + I + X - M + RE) A) and B)
F) All of the above

Question 19

When a currency is devalued the immediate impact may be an increase in a country's trade deficit. However, this situation tend to correct itself in 2 to 5 weeks..

Accepted Answer

A) True 
 B)False

Question 20

Of the following, which is NOT a part of J-Curve adjustment path?

Accepted Answer

A)  The currency contract period.
B)  The exchange rate pass-through period.
C)  The quantity adjustment period.
D)  Each of the above is part of the J-Curve adjustment path.E) B) and C)
F) C) and D)

Exam 4: The Balance of Payments

Correct Answer
verified

Imports have the potential to lower a country's inflation rate because of each of the following EXCEPT:

Correct Answer
verified

The subcategory that typically dominates the current account is ________.

Correct Answer
verified

In general, as a country's income increases, so does the demand for imports.

Correct Answer
verified

________ is the cross-border purchase of assets that are then managed in a way that hides the movement of money and its ownership.

Correct Answer
verified

Of the following, which is NOT a part of J-Curve adjustment path?

Correct Answer
verified

The two major concerns about foreign direct investment are:

Correct Answer
verified

In general there is consensus that should be free but there is no such consensus that should be free.

Correct Answer
verified

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

Correct Answer
verified

Balance of payment (BOP) data may be important for any of the following reasons:

Correct Answer
verified

When categorizing investments for the financial account component of the balance of payments the is an investment where the investor has no control whereas the is an investment where the investor has control over the asset.

Correct Answer
verified

The ________ includes all international economic transactions with income or payment flows occurring within the year.

Correct Answer
verified

Expenditures by U.S. tourists in foreign countries for foreign goods or services are factored into BOP calculations.

Correct Answer
verified

In 2007 the United States posted a current account deficit of -$731 billion. The bulk of the negative value came from

Correct Answer
verified

The BOP should always balance.

Correct Answer
verified

Because current and financial/capital account balances use double-entry bookkeeping it is unusual to find serious discrepancies in the debits and credits.

Correct Answer
verified

Anaconda Copper Inc. created a subsidiary in Chile last year to mine copper ore. The proportion of net income paid back to the parent company as a dividend would be recorded in the current account subcategory of ________.

Correct Answer
verified

When a currency is devalued the immediate impact may be an increase in a country's trade deficit. However, this situation tend to correct itself in 2 to 5 weeks..

Correct Answer
verified

Which of the following is NOT part of the balance of payments account?

Correct Answer
verified

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?

Correct Answer
verified
The ORA is the total reserves held by of...
View Answer

Exam 4: The Balance of Payments

Correct AnswerverifiedShow Answer

Imports have the potential to lower a country's inflation rate because of each of the following EXCEPT:

Correct AnswerverifiedShow Answer

The subcategory that typically dominates the current account is ________.

Correct AnswerverifiedShow Answer

In general, as a country's income increases, so does the demand for imports.

Correct AnswerverifiedShow Answer

________ is the cross-border purchase of assets that are then managed in a way that hides the movement of money and its ownership.

Correct AnswerverifiedShow Answer

Of the following, which is NOT a part of J-Curve adjustment path?

Correct AnswerverifiedShow Answer

The two major concerns about foreign direct investment are:

Correct AnswerverifiedShow Answer

In general there is consensus that ________ should be free but there is no such consensus that ________ should be free.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Balance of payment (BOP) data may be important for any of the following reasons:

Correct AnswerverifiedShow Answer

When categorizing investments for the financial account component of the balance of payments the ________ is an investment where the investor has no control whereas the ________ is an investment where the investor has control over the asset.

Correct AnswerverifiedShow Answer

The ________ includes all international economic transactions with income or payment flows occurring within the year.

Correct AnswerverifiedShow Answer

Expenditures by U.S. tourists in foreign countries for foreign goods or services are factored into BOP calculations.

Correct AnswerverifiedShow Answer

In 2007 the United States posted a current account deficit of -$731 billion. The bulk of the negative value came from

Correct AnswerverifiedShow Answer

The BOP should always balance.

Correct AnswerverifiedShow Answer

Because current and financial/capital account balances use double-entry bookkeeping it is unusual to find serious discrepancies in the debits and credits.

Correct AnswerverifiedShow Answer

Anaconda Copper Inc. created a subsidiary in Chile last year to mine copper ore. The proportion of net income paid back to the parent company as a dividend would be recorded in the current account subcategory of ________.

Correct AnswerverifiedShow Answer

When a currency is devalued the immediate impact may be an increase in a country's trade deficit. However, this situation tend to correct itself in 2 to 5 weeks..

Correct AnswerverifiedShow Answer

Which of the following is NOT part of the balance of payments account?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedThe ORA is the total reserves held by of...View AnswerShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In general there is consensus that should be free but there is no such consensus that should be free.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

When categorizing investments for the financial account component of the balance of payments the is an investment where the investor has no control whereas the is an investment where the investor has control over the asset.

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
The ORA is the total reserves held by of...
View Answer