Question 1

The primary component of the capital account is the balance of trade.

Accepted Answer

A) True 
 B)False

Question 2

​The World Bank was established to reduce poverty and promote economic development:

Accepted Answer

A)   ​in Asia through grants to businesses.
B)   ​by providing nonsubsidized loans (at market interest rates)  to governments and their agencies.
C)   ​by providing low-interest-rate loans (below-market rates)  to poor nations.
D)   ​through the private sector by providing loans to corporations and investing in their stock.E) A) and B)
F) None of the above B

Question 3

​The primary component of the current account is the:

Accepted Answer

A)   ​balance of trade.
B)   ​balance of gifts.
C)   ​balance of aid payments.
D)   ​balance of grant payments.E) B) and C)
F) A) and D)

Question 4

The World Trade Organization was established to provide a forum for multilateral trade negotiations and to settle trade disputes.

Accepted Answer

A) True 
 B)False

Question 5

The demand for U.S. exports tends to increase when:

Accepted Answer

A)   economic growth in foreign countries decreases.
B)   the currencies of foreign countries strengthen against the dollar.
C)   U.S. inflation rises.
D)   None of these are correct.E) A) and B)
F) B) and C) B

Question 6

​An increase in the use of quotas is expected to:

Accepted Answer

A)   ​reduce the country's current account balance, if other governments do not retaliate.
B)   ​increase the country's current account balance, if other governments do not retaliate.
C)   ​have no impact on the country's current account balance unless other governments retaliate.
D)   ​increase the volume of a country's trade with other countries.E) All of the above
F) C) and D)

Question 7

​In recent years, the United States has had a relatively (compared to other countries)  ____ balance of trade ____ with China.

Accepted Answer

A)   ​small; surplus
B)   ​large; surplus
C)   ​small; deficit
D)   ​large; deficitE) B) and C)
F) C) and D) D

Question 8

Direct foreign investment by U.S.-based MNCs occurs primarily in the Bahamas and Brazil.

Accepted Answer

A) True 
 B)False

Question 9

A balance-of-trade surplus indicates an excess of merchandise imports over merchandise exports.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following will probably not result in an increase in a country's current account balance (assuming everything else remains 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 these will result in an increased current account balance.F) D) and E)
G) B) and C)

Question 11

​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.E) A) and B)
F) A) and C)

Question 12

A U.S. purchase of patent rights from a firm in Mexico reflects a credit to the U.S. balance of payments account.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is mentioned in the text as a possible means by which the government may attempt to improve its balance-of-trade position (increase its exports or reduce its imports) ?

Accepted Answer

A)   The government could attempt to reduce its home currency's value.
B)   The government could require firms to engage in outsourcing.
C)   The government could provide subsidies to importers.
D)   All of these are mentioned.E) None of the above
F) B) and D)

Question 14

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

Accepted Answer

A)   ​Secondary income
B)   ​Primary income
C)   ​The balance of trade
D)   ​The balance of payments
E)   ​The capital accountF) B) and D)
G) A) and E)

Question 15

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 stocksF) A) and B)
G) A) and C)

Question 16

​A country's net outflow of funds ____ its interest rates, and ____ its economic conditions.

Accepted Answer

A)   ​affects; affects
B)   ​affects; does not affect
C)   ​does not affect; does not affect
D)   ​does not affect; affectsE) All of the above
F) A) and B)

Question 17

Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) between countries that do not affect the transfer of control.

Accepted Answer

A) True 
 B)False

Question 18

​Also known as the "central banks' central bank," the ____ attempts to facilitate cooperation among countries with regard to international transactions.

Accepted Answer

A)   ​World Bank
B)   ​International Finance Corporation (IF
C)  
C)   ​World Trade Organization
D)   ​International Development Association (ID
A)  
E)   ​Bank for International Settlements (BIS) F) A) and B)
G) B) and C)

Question 19

Regarding the U.S. balance of payments, capital account items are relatively minor compared to the financial account items.

Accepted Answer

A) True 
 B)False

Question 20

Assume that some U.S. firms will purchase supplies from either China or from U.S. firms. If the Chinese yuan appreciates against the dollar, that should reduce the U.S. balance-of-trade deficit with China.

Accepted Answer

A) True 
 B)False

Exam 2: International Flow of Funds

The primary component of the capital account is the balance of trade.

Correct AnswerverifiedShow Answer

​The World Bank was established to reduce poverty and promote economic development:

Correct AnswerverifiedB

​The primary component of the current account is the:

Correct AnswerverifiedShow Answer

The World Trade Organization was established to provide a forum for multilateral trade negotiations and to settle trade disputes.

Correct AnswerverifiedShow Answer

The demand for U.S. exports tends to increase when:

Correct AnswerverifiedB

​An increase in the use of quotas is expected to:

Correct AnswerverifiedShow Answer

​In recent years, the United States has had a relatively (compared to other countries) ____ balance of trade ____ with China.

Correct AnswerverifiedD

Direct foreign investment by U.S.-based MNCs occurs primarily in the Bahamas and Brazil.

Correct AnswerverifiedShow Answer

A balance-of-trade surplus indicates an excess of merchandise imports over merchandise exports.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A U.S. purchase of patent rights from a firm in Mexico reflects a credit to the U.S. balance of payments account.

Correct AnswerverifiedShow Answer

Which of the following is mentioned in the text as a possible means by which the government may attempt to improve its balance-of-trade position (increase its exports or reduce its imports) ?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

​A country's net outflow of funds ____ its interest rates, and ____ its economic conditions.

Correct AnswerverifiedShow Answer

Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) between countries that do not affect the transfer of control.

Correct AnswerverifiedShow Answer

​Also known as the "central banks' central bank," the ____ attempts to facilitate cooperation among countries with regard to international transactions.

Correct AnswerverifiedShow Answer

Regarding the U.S. balance of payments, capital account items are relatively minor compared to the financial account items.

Correct AnswerverifiedShow Answer

Assume that some U.S. firms will purchase supplies from either China or from U.S. firms. If the Chinese yuan appreciates against the dollar, that should reduce the U.S. balance-of-trade deficit with China.

Correct AnswerverifiedShow Answer

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The World Bank was established to reduce poverty and promote economic development:

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B

The primary component of the current account is the:

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B

An increase in the use of quotas is expected to:

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In recent years, the United States has had a relatively (compared to other countries) balance of trade with China.

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D

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

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A country's net outflow of funds its interest rates, and its economic conditions.

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Also known as the "central banks' central bank," the ____ attempts to facilitate cooperation among countries with regard to international transactions.

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