Question 1

Portfolio investments are transactions that involve long-term financial assets and affect the transfer of control.

Accepted Answer

A) True 
 B)False

Question 2

The era between 1880 and 1914, when the gold standard was in use, was characterized by increasing capital mobility.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements about the balance of payments is not true?

Accepted Answer

A)   The BOP is the summary statement of all international transactions between one country and all other countries.
B)   The BOP is a flow statement, summarizing all international transactions that occur across the geographic borders over a period of time, typically a year.
C)   Although the BOP must always balance in theory, in practice there are substantial imbalances as a result of statistical errors and misreporting of current account and financial account flows.
D)   All of the above are true.E) C) and D)
F) B) and C)

Question 4

The balance of payments is most like a(an)  ________.

Accepted Answer

A)   cash flow statement
B)   balance sheet
C)   income statement
D)   proxy statementE) A) and D)
F) B) and C)

Question 5

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 balance of trade (BOT) is the larges...

Question 6

Most U.S. debt purchased by foreigners is denominated in ________ and most foreign debt issued by countries such as Russia, Mexico, and Brazil is issued in ________.

Accepted Answer

A)   U.S. dollars; the purchasing investor's domestic currency
B)   the purchasing investor's domestic currency; the issuing country's domestic currency
C)   U.S. dollars; the issuing country's domestic currency
D)   U.S. dollars; U.S. dollarsE) B) and C)
F) C) and D)

Question 7

The immediate impact on the balance of trade (BOT) for a country in deficit when there is an immediate devaluation of it's currency is likely to be an even larger BOT deficit than prior to devaluation.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following would NOT be considered a typical BOP transaction?

Accepted Answer

A)   Toyota U.S.A. is a U.S. distributor of automobiles manufactured in Japan by its parent company.
B)   The U.S. subsidiary of European financial giant, Credit Suisse, pays dividends to its parent in Zurich.
C)   A U.S. tourist purchases gifts at a museum in London.
D)   All are example of BOP transactions.E) C) and D)
F) None of the above

Question 9

Over the last two decades the surplus on U.S. services trade has typically been ________ the deficit on U.S. goods trade.

Accepted Answer

A)   greater than
B)   equal to
C)   less than
D)   The relationship is constantly shifting from greater than to less than.E) C) and D)
F) B) and C)

Question 10

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.E) B) and C)
F) All of the above

Question 11

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) A) and C)
F) A) and B)

Question 12

International debt security purchases and sales are defined as portfolio investments for financial account purposes because by definition debt securities do not provide the buyer with ownership or control.

Accepted Answer

A) True 
 B)False

Question 13

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) B) and C)
F) A) and D)

Question 14

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) A) and D)
F) None of the above

Question 15

The beauty of the J-curve adjustment path for trade balance adjustments is that the process is very quick, typically taking only a month or so to complete.

Accepted Answer

A) True 
 B)False

Question 16

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) None of the above
F) A) and B)

Question 17

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) A) and B)
F) A) and C)

Question 18

The authors identify a tip for understanding BOP accounting. They recommend that you "follow the cash flow."

Accepted Answer

A) True 
 B)False

Question 19

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 20

Which of the following is the best definition of money laundering?

Accepted Answer

A)   legal transfer of funds through the usual international payments mechanisms
B)   the transfer of cash into collectibles that are then transferred across borders
C)   the cross-border purchase of assets that are then managed in a way that hide the movement of money and its ownership
D)   False invoicing of international trade transactionsE) A) and C)
F) A) and D)

Exam 4: The Balance of Payments

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

Correct AnswerverifiedShow Answer

The balance of payments is most like a(an) ________.

Correct AnswerverifiedShow Answer

Most U.S. debt purchased by foreigners is denominated in ________ and most foreign debt issued by countries such as Russia, Mexico, and Brazil is issued in ________.

Correct AnswerverifiedShow Answer

The immediate impact on the balance of trade (BOT) for a country in deficit when there is an immediate devaluation of it's currency is likely to be an even larger BOT deficit than prior to devaluation.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The beauty of the J-curve adjustment path for trade balance adjustments is that the process is very quick, typically taking only a month or so to complete.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe balance of trade (BOT) is the larges...View AnswerShow Answer

Portfolio investments are transactions that involve long-term financial assets and affect the transfer of control.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements about the balance of payments is not true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The authors identify a tip for understanding BOP accounting. They recommend that you "follow the cash flow."

Correct AnswerverifiedShow Answer

Which of the following is the best definition of money laundering?

Correct AnswerverifiedShow Answer

Over the last two decades the surplus on U.S. services trade has typically been ________ the deficit on U.S. goods trade.

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

International debt security purchases and sales are defined as portfolio investments for financial account purposes because by definition debt securities do not provide the buyer with ownership or control.

Correct AnswerverifiedShow Answer

The era between 1880 and 1914, when the gold standard was in use, was characterized by increasing capital mobility.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following would NOT be considered a typical BOP transaction?

Correct AnswerverifiedShow Answer

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Most U.S. debt purchased by foreigners is denominated in and most foreign debt issued by countries such as Russia, Mexico, and Brazil is issued in .

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The balance of trade (BOT) is the larges...
View Answer

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

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