Question 1

____ 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 account A

Question 2

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. A

Question 3

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

Accepted Answer

A) True 
 B)False  False

Question 4

U.S. government officials would likely prefer that China devalue the yuan against the dollar.

Accepted Answer

A) True 
 B)False

Question 5

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.

Question 6

Intracompany trade is the exporting of products by one country to other countries below cost.

Accepted Answer

A) True 
 B)False

Question 7

Direct foreign investment into the United States represents a ____.

Accepted Answer

A)  capital inflow
B)  trade inflow
C)  capital outflow
D)  trade outflow

Question 8

Assume the United States has a balance-of-trade surplus with the country of Thor. When individuals in Thor without permission manufacture video games and DVDs that look almost exactly like the original products produced in the United States and other countries, they ____ the U.S. balance-of-trade surplus with Thor. This activity is called ____.

Accepted Answer

A)  reduce; flipping
B)  reduce; piracy
C)  increase; piracy
D)  increase; flipping

Question 9

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 the above.

Question 10

The General Agreement on Tariffs and Trade (GATT) accord of 1993 called for:

Accepted Answer

A)  increased trade restrictions outside North America.
B)  lower trade restrictions around the world.
C)  uniform environmental standards around the world.
D)  uniform worker health laws.

Question 11

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 the above will result in an increased current account balance.

Question 12

The "J-curve" effect describes:

Accepted Answer

A)  the continuous long-term inverse relationship between a country's current account balance and the country's growth in gross domestic product.
B)  the short-run tendency for a country's balance of trade to deteriorate even while its currency is depreciating.
C)  the tendency for exporters to initially reduce the price of goods when their own currency appreciates.
D)  the tendency of a country's currency to initially depreciate aFter the country's inflation rate declines.

Question 13

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 14

The balance of payments is a summary of all transactions between domestic and foreign residents for a specific country over a specified period of time.

Accepted Answer

A) True 
 B)False

Question 15

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.

Question 16

The term "dumping" refers to the:

Accepted Answer

A)  exporting of goods that do not meet quality standards.
B)  sale of junk bonds to foreign countries.
C)  removal of foreign subsidiaries by the host government.
D)  exporting of goods at prices below cost.

Question 17

Which of the following countries purchases the largest amount of exports by U.S. firms?

Accepted Answer

A)  Mexico
B)  Japan
C)  Canada
D)  France

Question 18

The North American Free Trade Agreement (NAFTA) increased restrictions on:

Accepted Answer

A)  trade between Canada and Mexico.
B)  trade between Canada and the United States
C)  direct foreign investment in Mexico by U.S. firms.
D)  none of the above.

Question 19

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; affects

Question 20

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)

Exam 2: International Flow of Funds

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

The primary component of the current account is the:

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

U.S. government officials would likely prefer that China devalue the yuan against the dollar.

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

Intracompany trade is the exporting of products by one country to other countries below cost.

Direct foreign investment into the United States represents a ____.

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

The General Agreement on Tariffs and Trade (GATT) accord of 1993 called for:

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

The "J-curve" effect describes:

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

The balance of payments is a summary of all transactions between domestic and foreign residents for a specific country over a specified period of time.

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

The term "dumping" refers to the:

Which of the following countries purchases the largest amount of exports by U.S. firms?

The North American Free Trade Agreement (NAFTA) increased restrictions on:

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

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