Deck 17: International Finance

Question 1

The value of imports and exports is recorded in the

A)capital and financial account.
B)official settlements account.
C)official reserves account.
D)current account.
E)international trade account.

Answer 1

D

Question 2

The current account is the record of

A)changes in the government's holdings of foreign currency.
B)foreign investment in the nation minus the nation's investment abroad.
C)a nation's international trading,borrowing and lending.
D)the nation's exports but not its imports.
E)payments for imports,receipts for exports,net interest and net transfers.

Answer 2

E

Question 3

When an Australian company purchases $1 million worth of French cheese,the value of that transaction is recorded in the

A)current account.
B)goods account.
C)transfer account.
D)capital and financial account.
E)investment account.

Answer 3

A

Question 4

Suppose BHP Billiton purchases a gold mine in Canada.This purchase is entered into which of the balance of payments accounts?

A)The trade account.
B)The current account.
C)The purchases account.
D)The reserve assets account.
E)The capital and financial account.

Question 5

When an Australian company makes a $200,000 donation to the International Red Cross to help the victims of an earthquake in India,the transaction is recorded in the

A)international help account.
B)capital and financial account.
C)official settlements account.
D)current account.
E)one-way donations account.

Question 6

In the capital and financial account,the largest category of international transactions is

A)statistical discrepancy.
B)exports and imports.
C)net interest.
D)foreign investment in Australia.
E)net transfers.

Question 7

Foreign investment in Australia and Australian investment abroad is recorded in the

A)investment account.
B)current account.
C)capital and financial account.
D)creditor/debtor account.
E)official settlements account.

Question 8

Interest received from Australian holdings of foreign assets and interest paid to foreigners for Australian investment assets is recorded in the

A)official settlements account.
B)current account.
C)capital and financial account.
D)official reserves account.
E)official dollar account.

Question 9

Which of the following is a balance of payments account?
I)The current account.
Ii)The past account.
Iii)The capital and financial account.

A)i only
B)ii only
C)iii only
D)i and iii
E)i,ii and iii

Question 10

The capital and financial account records

A)transactions involving trade,interest payments and net transfers.
B)all the purchases and sales of capital goods in Australia.
C)the current value of the balance of payments.
D)imports and exports of capital goods.
E)transactions involving foreign investment in Australia and Australian investment abroad.

Question 11

If the current account balance is -$100 billion,net interest = $0,net transfers = $0,then

A)there was an increase in net foreign assets.
B)the country is loaning abroad.
C)imports are greater than exports.
D)exports are greater than imports.
E)the capital and financial account balance must be +$100 billion.

Question 12

Suppose you own some German government bonds that pay you interest every year.This interest is entered into which of the balance of payments accounts?

A)The interest account.
B)The capital and financial account.
C)The current account.
D)The official settlements account.
E)The trade account.

Question 13

If the current account balance is negative,net interest is $100 billion and net transfers are -$100 billion,then

A)imports exceed exports.
B)the official settlements account must be negative.
C)real GDP exceeds potential GDP.
D)the official settlements account must be positive.
E)exports exceed imports.

Question 14

The trade between countries is recorded in accounts called the balance of

A)payments accounts.
B)Australian official trade accounts.
C)export and import accounts.
D)currency accounts.
E)international trade accounts.

Question 15

When a German company purchases an Australian company for $20 million,in the balance of payments the value of that transaction is recorded in the

A)official purchases account.
B)capital and financial account.
C)purchases account.
D)investment account.
E)current account.

Question 16

The capital and financial account is the record of

A)changes in the government's holdings of foreign currency.
B)foreign investment in the nation minus the nation's investment abroad.
C)a nation's international trading,borrowing and lending.
D)payments for imports,receipts for exports,net interest and net transfers.
E)the nation's imports and exports of capital goods.

Question 17

In 2013/14,Australia recorded

A)a current account deficit and a capital and financial account deficit.
B)no change in official reserves.
C)a current account surplus because imports were greater than exports.
D)a capital and financial account deficit because exports were greater than imports.
E)a current account deficit because imports were greater than exports.

Question 18

The balance of payments accounts record all of the following EXCEPT the country's

A)international trading.
B)international lending.
C)change in official reserves.
D)domestic investment.
E)international borrowing.

Question 19

The record of international receipts and payments is called the

A)current account.
B)Australian official reserves.
C)balance of payments.
D)capital and financial account.
E)official settlements account.

Question 20

Boeing purchases a plant for the production of commercial aircraft components in Fishermans Bend,Victoria.This purchase is entered into which of the balance of payment accounts?

A)The capital and financial account.
B)The trade account.
C)The foreign account.
D)The current account.
E)The official settlements account.

Question 21

The table above gives data for the nation of Syldavia.The current account has a

A)$40 billion deficit.
B)$30 billion deficit.
C)$40 billion surplus.
D)$50 billion deficit.
E)balance of $320 billion.

Question 22

From the 1990s to the present,the Australian current account balance has had a ________,and the Australian capital and financial account balance has had ________.

A)deficit;a deficit
B)deficit;neither a deficit nor a surplus
C)deficit;a surplus
D)surplus;a deficit
E)surplus;a surplus

Question 23

In 2013/14,in Australia the sum of the balance of all three of the balance of payments accounts was

A)zero.
B)slightly negative.
C)slightly positive.
D)greatly positive.
E)greatly negative.

Question 24

If Australian official reserves increase,the

A)reserve assets account balance is negative.
B)reserve assets account balance is positive.
C)balance of payments increases.
D)current account increases.
E)current account is positive.

Question 25

The sum of the balances of the three accounts of the balance of payments (the current account,the capital and financial account,and the reserve assets account)is

A)negative if there is a balance of trade deficit.
B)positive if there is a balance of trade surplus.
C)equal to zero.
D)negative if there is a balance of trade surplus or positive if there is a balance of trade deficit.
E)positive if there is a balance of trade surplus or negative if there is a balance of trade deficit.

Question 26

The reserve assets account is the record of

A)a nation's international trading,borrowing and lending.
B)exports of capital goods minus imports of capital goods.
C)changes in the government's holdings of foreign currency.
D)payments for imports,receipts for exports,net interest and net transfers.
E)foreign investment in the nation minus the nation's investment abroad.

Question 27

The table above gives data for the nation of Syldavia.The reserve assets settlements account has a

A)$40 billion deficit.
B)$30 billion deficit.
C)$40 billion surplus.
D)zero balance.
E)balance of $380 billion.

Question 28

The table above gives data for the nation of Syldavia.The capital and financial account has a

A)$40 billion deficit.
B)$30 billion deficit.
C)$40 billion surplus.
D)$50 billion deficit.
E)balance of $380 billion.

Question 29

If the current account balance has a $70 million deficit and there was no change in official reserves during that year,then we know that

A)the capital and financial account balance must have a $70 million surplus.
B)the capital account balance must have a $70 million deficit.
C)net transfers were -$70 million.
D)the balance of payments must register a $70 million surplus.
E)the official settlements account balance must have a $70 million surplus.

Question 30

When the government increases the level of official reserves by $50 million,the change is recorded in the

A)reserve assets account.
B)capital and financial account.
C)current account.
D)official reserves account.
E)foreign currency account.

Question 31

If the current account balance is -$100 billion,and the capital and financial account balance is $80 billion,then the reserve assets account balance is

A)$180 billion.
B)-$180 billion.
C)-$20 billion.
D)0)
E)$20 billion.

Question 32

The table above gives data for the nation of Syldavia.The sum of the current account balance,capital and financial account balance,and the reserve assets account balances of Syldavia is equal to

A)$10 billion.
B)-$10 billion.
C)zero.
D)$30 billion.
E)$40 billion.

Question 33

When the Australian capital and financial account shows a positive balance,that is an indication of

A)foreigners investing more in Australia than Australia is investing abroad.
B)Australian industries becoming more competitive.
C)Australia acquiring more foreign reserves.
D)the value of Australian exports of capital goods exceeding the value of Australian imports of capital goods.
E)the value of all Australian exports exceeding the value of all Australian imports.

Question 34

In a year,if foreigners invest ________ in Australia than Australians invest abroad,the capital and financial account balance is ________.

A)less;positive
B)more;zero
C)more;positive
D)less;zero
E)more;negative

Question 35

Australian official reserves are

A)equal to the government's holdings of gold.
B)equal to the value of the government's oil reserves.
C)equal to the balance on the capital and financial account.
D)equal to the value of Commonwealth government debt in the hands of foreigners.
E)the government's holdings of foreign currency.

Question 36

Suppose that the Australian government acquires more foreign currency.How does this change affect the balance of payments accounts?

A)The capital and financial account is negative.
B)The reserve assets account balance is positive.
C)The capital and financial account is positive.
D)The balance of payments accounts sum to a positive number equal to the value of the additional foreign currency the government has obtained.
E)The reserve assets account balance is negative.

Question 37

The government's holdings of foreign currency is recorded in the

A)currency account.
B)money account.
C)capital and financial account.
D)reserve assets account.
E)current account.

Question 38

The reserve assets account contains data on

A)official government complaints between countries.
B)capital imports and exports.
C)officials' expenses.
D)official reserves.
E)trade complaints that are officially settled.

Question 39

Between 1983/84 and 2013/14,Australia

A)had a current account surplus or deficit that was almost equal to $0 every year.
B)some years had a deficit and some years had a surplus that totalled a surplus of $2.5 trillion.
C)had a current account deficit almost every year.
D)some years had a deficit and some years had a surplus that netted out to $0.
E)had a current account surplus almost every year.

Question 40

There are three balance of payments accounts.The sum of the balances on these three accounts will equal

A)the total amount of the nation's foreign borrowing.
B)zero.
C)the total amount of the nation's foreign lending.
D)the total amount of the nation's exports.
E)the total amount of the nation's imports.

Question 41

The current account balance is equal to net exports ________ net interest ________ net transfers.

A)minus;plus
B)plus;minus
C)multiplied by;multiplied by
D)minus;minus
E)plus;plus

Question 42

The current account balance equals

A)net exports + net transfers - net interest.
B)net exports + net transfers.
C)net exports - net transfers + net interest.
D)net exports + net transfers + net interest.
E)net exports - net transfers - net interest.

Question 43

A nation that has invested more in the rest of the world than other countries have invested in it is called a

A)creditor nation.
B)debtor nation.
C)net lender.
D)net borrower.
E)saver nation.

Question 44

Australia currently is

A)a creditor nation and has been since 1989.
B)neither a debtor nation nor a creditor nation.
C)a debtor nation and has been since the end of World War II in 1945.
D)a debtor nation and has been since 1989.
E)a creditor nation and has been since the end of World War II in 1945.

Question 45

Net exports is the sum of

A)the current account balance and capital account balance.
B)the private sector balance and the government sector balance.
C)the current account balance and the official settlements account balance.
D)the balance of payments accounts.
E)exports and imports.

Question 46

The private sector balance equals

A)net taxes plus government expenditures.
B)saving minus investment.
C)saving plus investment.
D)net taxes minus government expenditures.
E)investment minus saving.

Question 47

Which of the following is true?

A)A net lender must be a creditor nation.
B)Most countries are net borrowers.
C)A net lender must be a debtor nation.
D)Most countries are net lenders.
E)A net borrower must be a debtor country.

Question 48

A nation that currently has a surplus in its capital account is called a

A)net lender.
B)current account surplus nation.
C)debtor nation.
D)net borrower.
E)creditor nation.

Question 49

The government sector balance equals

A)net taxes minus government expenditures.
B)net taxes plus government expenditures.
C)saving plus investment.
D)saving minus investment.
E)government expenditures plus investment.

Question 50

Which of the following is correct?
I)The private sector balance equals saving minus investment.
Ii)Net exports is exports of goods and services plus imports of goods and services.
Iii)Net exports equals the sum of the private sector balance plus the government sector balance.

A)i only
B)ii only
C)iii only
D)i and iii
E)i,ii and iii

Question 51

A country reports exports minus imports of $300 billion,net interest income of $30 billion,net transfers of $50 billion,and no change in official reserves.The country is a

A)net borrower.
B)net asset.
C)net liability.
D)debtor nation.
E)net lender.

Question 52

If private savings equal $1.2 billion and private investment equals $1.5 billion,then there is a

A)private sector deficit.
B)current account balance.
C)government sector surplus.
D)government sector deficit.
E)private sector surplus.

Question 53

A country has imports of goods and services of $2,000 billion.The interest paid to the rest of the world is $500 billion.The interest received from the rest of the world is $400 billion.The decrease in official reserves is $10 billion.The government sector balance is $200 billion,saving is $1,800 billion,investment is $2,000 billion,and net transfers is zero.What is the current account balance?

A)-$100 billion
B)-$200 billion
C)-$10 billion
D)$100 billion
E)$200 billion

Question 54

A country has imports of goods and services of $2,000 billion.The interest paid to the rest of the world is $500 billion.The interest received from the rest of the world is $400 billion.The decrease in official reserves is $10 billion.The government sector balance is $200 billion,saving is $1,800 billion,investment is $2,000 billion,and net transfers is zero.What is net exports?

A)-$200 billion
B)$100 billion
C)-$100 billion
D)$0
E)$200 billion

Question 55

The private sector balance is equal to savings ________ investment,and the government sector balance is equal to government expenditure ________ taxes.If there is a deficit in the private sector balance and a deficit in the government sector balance,then there must be a ________ in net exports.

A)plus;plus;surplus
B)minus;minus;surplus
C)plus;minus;surplus
D)minus;minus;deficit
E)plus;plus;deficit

Question 56

During the last year,foreign investment in a country was $500 billion and the country's investment abroad was $600 billion.Which of the following statements is true?

A)The country has net lending of $100 billion.
B)The country has a current account deficit of $100 billion.
C)The country has a current account deficit of $1,100 billion.
D)The country has net borrowing of $100 billion.
E)The country has a capital and financial account deficit of $1,100 billion.

Question 57

Fluctuations in the current account balance are mainly the result of fluctuations in

A)net interest.
B)foreign reserves.
C)net transfers.
D)imports of capital.
E)net exports.

Question 58

A country with a reserve assets balance of zero and a negative current account balance is a

A)net lender.
B)net borrower.
C)net creditor.
D)net saver.
E)None of the above answers is correct because it is not possible to have an official settlements balance of zero and a negative current account balance.

Question 59

X = exports,M = imports,S = saving,I = investment,T = net taxes,and G = government expenditure.Which of the following formulas is correct?

A)X - M = S - I + T - G
B)X - M = S + I +T + G
C)X - M = S + I -T + G
D)X - M = S - I - T - G
E)X - M = S + I + T - G

Question 60

A nation that currently has a surplus in its current account is called a

A)debtor nation.
B)creditor nation.
C)capital account surplus nation.
D)net lender.
E)net borrower.

Question 61

The demand for Australian dollars in the foreign exchange market is a derived demand.A derived demand means that the demand is derived from

A)the demand by Australian residents for foreign goods,services and assets.
B)the demand for Australian goods,services and assets.
C)the supply of Australian dollars.
D)government policy.
E)the domestic demand for Australian goods and services.

Question 62

Today,one Australian dollar exchanges for 1.10 U.S dollars.The next morning the same dollar exchanges for 1.07 U.S.dollars.We can conclude that the Australian dollar has ________ and the U.S dollar has ________.

A)depreciated;neither appreciated nor depreciated
B)depreciated;appreciated
C)appreciated;appreciated
D)appreciated;depreciated
E)depreciated;depreciated

Question 63

When Australia exports goods and services to Japan,there is an increase in the

A)demand for Australian dollars.
B)supply of Australian dollars.
C)Australian reserve assets account balance.
D)supply of Japanese yen.
E)Australian capital account balance.

Question 64

When a currency decreases in value relative to another currency,the currency has

A)decelerated.
B)appreciated.
C)depreciated.
D)declined.
E)accelerated.

Question 65

If the exchange rate rises,then the quantity of dollars demanded ________ because with the higher exchange rate,exports ________.

A)increases;increase
B)increases;decrease
C)does not change;do not change
D)decreases;increase
E)decreases;decrease

Question 66

If the exchange rate changes from 0.70 euros per dollar to 0.80 euros per dollar,the euro has

A)appreciated against the dollar.
B)appreciated against the euro.
C)fallen inversely in value.
D)depreciated against the euro.
E)depreciated against the dollar.

Question 67

When the exchange rate between the U.S.dollar and the euro changes from 1.07 euros per dollar to 0.93 euros per dollar,then the

A)U)S.dollar has depreciated against the euro.
B)U)S.dollar has depreciated against the dollar.
C)U)S.dollar has appreciated against the euro.
D)euro has depreciated against the euro.
E)euro has depreciated against the dollar.

Question 68

When a Chinese company purchases Australian iron ore,the Chinese company pays for it with

A)euros or yen.
B)Australian dollars.
C)gold.
D)Chinese goods and services.
E)Chinese yuan.

Question 69

In 2014,an Australian dollar could be traded for 100 yen and in 2015 an Australian dollar could be traded for 90 yen.Between these two years,the dollar has become ________ valuable and so the dollar has ________.

A)less;depreciated against the yen
B)more;appreciated against the yen
C)more;depreciated against the yen
D)less;appreciated against the yen
E)more;appreciated against the dollar

Question 70

A country that is borrowing more from the rest of the world than it is lending is called a

A)net creditor.
B)net lender.
C)net loaner country.
D)net borrower.
E)net debtor.

Question 71

If the U.S.dollar falls from 1.25 euros to 1.00 euro,then the U.S.dollar has ________ and the euro has ________.

A)depreciated;appreciated
B)shrunk;grown
C)appreciated;depreciated
D)depreciated;depreciated
E)appreciated;appreciated

Question 72

The price at which one currency exchanges for another currency is called the

A)foreign exchange rate.
B)net export exchange rate.
C)money exchange rate.
D)value of the dollar.
E)currency exchange rate.

Question 73

The foreign exchange rate is defined as

A)the price at which one currency exchanges for another.
B)the rate or the speed with which the currencies of the worlds are traded.
C)equal to the amount of the current account deficit.
D)the volume of the world currencies traded.
E)equal to the amount of the capital account deficit.

Question 74

If the exchange rate rises,the quantity of Australian dollars demanded

A)increases and there is movement up along the demand curve for dollars.
B)does not change.
C)decreases and there is movement up along the demand curve for dollars.
D)increases and there is movement down along the demand curve for dollars.
E)decreases and there is movement down along the demand curve for dollars.

Question 75

If the exchange rate changes from 0.70 euro per dollar to 0.80 euro per dollar,the dollar has

A)depreciated against the euro.
B)fallen inversely in value.
C)depreciated against the dollar.
D)appreciated against the dollar.
E)appreciated against the euro.

Question 76

On the foreign exchange market,an increase in a country's exchange rate

A)decreases the demand for its currency and shifts the demand curve rightward.
B)decreases the quantity demanded of its currency and leads to a movement up along the demand curve.
C)increases the quantity demanded of its currency and leads to a movement up along the demand curve.
D)decreases the demand for its currency and shifts the demand curve leftward.
E)increases the quantity demanded of its currency and leads to a movement down along the demand curve.

Question 77

When a currency depreciates,its value has

A)fallen against another currency.
B)been fixed against the value of another country.
C)remained constant against that of another currency.
D)fluctuated around a particular value.
E)risen against another currency.

Question 78

A country has imports of goods and services at $2,000 billion.The interest paid to the rest of the world is $500 billion.The interest received from the rest of the world is $400 billion.The decrease in official reserves is $10 billion.The government sector balance is $200 billion,saving is $1,800 billion,investment is $2,000 billion,and net transfers is zero.Using this information,what is the capital account balance?

A)-$10 billion
B)$10 billion
C)$90 billion
D)-$200 billion
E)-$90 billion

Question 79

When the Australian dollar rises in value relative to the Japanese yen,the dollar has ________ and,when the dollar falls in value,it has ________.

A)grown;shrunk
B)appreciated;depreciated
C)grown;shrunken
D)depreciated;appreciated
E)been bullish;been bearish

Question 80

Which of the following is a factor in determining the demand for the Australian dollar on the foreign exchange market?
I)The exchange rate.
Ii)Interest rates in Australia and other countries.
Iii)The expected future exchange rate.

A)i only
B)ii only
C)iii only
D)i and ii
E)i,ii and iii