Unit 3

The largest share of the world's international trade is between

• the developing countries

• the developing countries and the industrialized countries

• the industrialized countries

• the industrialized countries and the former centrally planned countries

Which of the following would not increase barriers to world trade?

• The imposition by the Indian government of controls on medicines produced overseas

• A voluntary agreement between the government of the USA and foreign producers limiting the volume of textile imports to the USA

• A requirement by the Chinese government that customs documents be presented and completed in Chinese

• The abolition of agricultural support systems provided to farmers in the European Union

Which of the following is most likely to increase the international demand for a country's currency?

• Greater price competitiveness of the country in international markets

• A fall in domestic interest rates

• An increase in the country's rate of inflation

• An increase in the productivity of workers in neighbouring countries

Other things being equal, which of the following would be most likely to decrease the price of the euro in terms of . the Japanese yen?

• Interest rates rise in Europe

• The EU imposes tariffs on Japanese goods

• The European inflation rate is higher than the Japanese inflation rate

• The number of Japanese tourists visiting Europe increases

Which of the following characteristics is not an advantage of floating exchange rates?

• The balance of payments are self-correcting

• International currency shortages do not occur

• Central banks do not have to hold currency reserves

• Businesses enjoy exchange rate certainty

Which one of the following would appear as a credit item in the French balance of payments on current account?

• the purchase by a Japanese company of a French hotel chain

• Money sent by French residents to relatives abroad

• Expenditure on local services by French soldiers stationed abroad

• The expenditure of Italian tourists in France

Which of the following represents an invisible export in the balance of payments of the US?

• Payment of dividends to Japanese shareholders of Honda (USA)

• Spending by Japanese tourists in New York on restaurant meals

• The purchase of an Australian company by an American firm

• US aid to developing countries

Which one of the following transactions would be recorded in the balance of payments accounts as a positive item for Alba, but a negative item for Bayona?

• An oil company from Alba develops an oil field in Bayona

• Oil executives from Alba stay in hotels in Bayona

• Petrol (gasoline) from a refinery in Alba is sold in Bayona

• Petrol (gasoline) from Alba is taxed by the Bayona government

Which of the following would not be included in a country's balance of payments figures?

• Borrowing from the IMF

• Private investment in other countries

• Exports and imports of goods and services

• The terms of trade

Which one of the following is not included in the current account of the balance of payments?

• Export of cars

• Foreign direct investment

• Spending by tourists

• Dividend payments on shares held abroad