FOREX / BOP Quiz Review

ll of the following are counted in a nation's current account (CA) except:

• A. A $50,000 car imported from Italy

• B. $500 of cheese exported from France

• C. A $50 million Chinese factory purchased by a Canadian

• D. $1 million donated in first aid supplies to Indonesia

Which of the following would decrease the U.S. capital and financial account (CFA)?

• A. A boat purchased by a British investment banker in Florida

• B. A ski chateau purchased in Switzerland by an American entrepreneur

• C. An American earns $1000 in the Japanese stock market

• D. The purchase of $1000 of US Treasury bonds by a Chinese investor

Which of the following are included in a nation's balance of payments accounts?

I. International trading

II. International lending

III. Domestic investment

• A. I, II, and III only

• B. I and II only

• C. I and III only

• D. II and III only

Which of the following is true regarding international trade:

• A. A country that exports more than it imports has a trade deficit

• B. A country that exports more than 30% of their GDP has a trade surplus

• C. A deficit in the current account is offset by a surplus in the capital and financial account

• D. A country that exports more than it imports will have a financial account surplus

An increase in Korea’s demand for U.S. goods would cause the US dollar to:

• A. Depreciate because of inflation

• B. Depreciate because the U.S. would be selling more dollars to Korea

• C. Depreciate because the U.S. money supply would increase as exports rise

• D. Appreciate because Korea would be buying more U.S. dollars

If the demand for the British Pound increases relative to the U.S. dollar, then the:

• A. US dollar would appreciate

• B. Supply of US dollars would decrease

• C. Quantity supplied of Pounds would decrease

• D. British pound would appreciate

Suppose incomes fall in the United States, but not in Japan. Which of the following will occur?

• A. The US dollar will appreciate and the Japanese Yen will depreciate 

• B. The US dollar will appreciate and the Japanese Yen will appreciate

• C. US imports from Japan will increase

• D. The US dollar will depreciate and the Japanese Yen will appreciate

 Suppose price level increases more in the United States than it does in Indonesia. What is the short-run impact on U.S. net exports, the value of the U.S. dollar, and the value of the Indonesian rupee?

Net Exports / U.S. dollar / Indonesian rupee

• A. Increase / depreciate / depreciate

• B. Decrease / depreciate / appreciate

• C. Increase / depreciate / appreciate

• D. Decrease / appreciate / depreciate

Suppose interest rates fall in the United States, but they don't fall in Mexico. What is the short-run impact on the value of the U.S. dollar (USD) and the value of the Mexican Peso (Peso)?

    USD / Peso

• A. Appreciate / appreciate

• B. Appreciate / depreciate 

• C. Depreciate / depreciate

• D. Depreciate / appreciate 

An increase in a country’s interest rate relative to other country’s interest rate will most likely cause which of the following?

• A. Capital inflow into the country to exceed capital outflow

• B. An increase in the supply of the country’s currency 

• C. The depreciation of the country’s currency

• D. An increase in the amount of domestic investment