tcqt 3

Under pure floating exchange rate regime, A. The sum of the current account and the capital amount balance is 0. B. The sum of the current account, the capital account and the official reserve account balance equals 0. C. The current account, the capital account, the official reserve account and the statistical discrepancy balance out to zero. D. All above statements are correct.

• A. The sum of the current account and the capital amount balance is 0.

• B. The sum of the current account, the capital account and the official reserve account balance equals 0.

• C. The current account, the capital account, the official reserve account and the statistical discrepancy balance out to zero.

• D. All above statements are correct.

Which of the following statements about Marshall-Lerner condition is NOT correct? A. Devaluation of the currency reduces the current account deficit or may deteriorate further the current account. B. The effect of the currency devaluation on the balance of payments depends on the volume effect and price effect. C. The effect of the currency revaluation on the balance of payments doesn't depend on the volume effect and price effect. D. The effect of the currency revaluation on the balance of payments depends on the volume effect and price effect.

• A. Devaluation of the currency reduces the current account deficit or may deteriorate further the current account.

• B. The effect of the currency devaluation on the balance of payments depends on the volume effect and price effect.

• C. The effect of the currency revaluation on the balance of payments doesn't depend on the volume effect and price effect.

• D. The effect of the currency revaluation on the balance of payments depends on the volume effect and price effect.

The J-curve effect implies that following a currency depreciation, a country's trade balance: A. improves before it worsens. C. worsens before it improves. B. continually worsens D. continually improves.

• A. improves before it worsens.

• C. worsens before it improves.

• B. continually worsens

• D. continually improves.

Question 4: The “volume effect” is:

• The effect of a change in exchange rate on imports and exports.

• The effect of a change in tariffs on the volume of foreign trade.
  

• The effect of a change in disposable income on imports and exports.

• None

The current account includes: A. the export and import of goods and services. B. all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses. C. all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights (SDRs). D. none of the above.

• A. the export and import of goods and services.

• B. all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses.

• C. all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights (SDRs).

• D. none of the above.

The capital account includes: A. the export and import of goods and services. B. all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses. C. all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights (SDRs). D. none of the above.

• A. the export and import of goods and services.

• B. all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses.

• C. all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights (SDRs).

• D. none of the above.

In 2007 the United States had a current account deficit. The current account deficit implies that the United States: A. had a surplus on legal consulting and engineering services. B. produced more output than it consumed. C. consumed more output than it produced. D. none of the above.

• A. had a surplus on legal consulting and engineering services.

• B. produced more output than it consumed.

• C. consumed more output than it produced.

• D. none of the above.

The "J-curve effect" shows: A. the initial deterioration and the eventual improvement of a country's trade balance following a currency depreciation. B. the initial improvement and the eventual depreciation of a country's trade balance following a currency depreciation. C. the trade balance's lack of responsiveness to the exchanges rate changes. D. none of the above.

• A. the initial deterioration and the eventual improvement of a country's trade balance following a currency depreciation.

• B. the initial improvement and the eventual depreciation of a country's trade balance following a currency depreciation.

• C. the trade balance's lack of responsiveness to the exchanges rate changes.

• D. none of the above.

A currency depreciation will begin to improve the trade balance immediately: A. if the demand for imports and exports are inelastic. B. if the demand for imports and exports are elastic. C. if imports decrease and exports decrease. D. None of the above

• A. if the demand for imports and exports are inelastic.

• B. if the demand for imports and exports are elastic.

• C. if imports decrease and exports decrease.

• D. None of the above

A depreciation will begin to improve the trade balance immediately if: A. imports and exports are responsive to the exchange rate changes. B. imports and exports are inelastic to the exchange rate changes. C. consumers exhibit brand loyalty and price inelasticity. D. All of the above.

• A. imports and exports are responsive to the exchange rate changes.

• B. imports and exports are inelastic to the exchange rate changes.

• C. consumers exhibit brand loyalty and price inelasticity.

• D. All of the above.