Quiz about C222

Question 1

Recently, the U>S experienced an annual balance of trade representing a

Accepted Answer

deficit

Answer

large surplus (exceeding 100 bilion)

Answer

small surplus

Answer

level of zero

Question 2

If a country's government imposes a tariff on imported goods, that country's current account balance will likely______(assuming no retaliation by other governments)

Accepted Answer

increase

Answer

decrease

Answer

remain unaffected

Answer

decrease; increaseeither A or C are possible

Question 3

A high home inflation rate relative to other countries would ____ the home country's current account balance, other things equal. A high growth in the home income level relative to other countries would _______ the home country's current account balance, other things equal.

Accepted Answer

decrease;decrease

Answer

increase; increase

Answer

increase; decrease

Answer

decrease; increase

Question 4

______ purchases more U.S exports than the other countries listed here

Accepted Answer

Canada

Answer

Italy

Answer

Spain

Answer

Mexico

Question 5

An increase in the current account deficit will place _____ pressure in the home currency value, other things equal

Accepted Answer

downward

Answer

Upward

Answer

no

Answer

upward and downward ( depending on the size of the deficit )

Question 6

If the home currency begins to appreciate against other currencies, this should_____the current account balance, other things equal ( assume that substitutes are available in the countries and that the prices charged by firms remain the same )

Accepted Answer

reduce

Answer

increase

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have no impact on

Answer

all of the above are equally possible

Question 7

The International Financial Corporation was established to :

Accepted Answer

enhance economic development of the private sector through investment in stock of corporations

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enhance development solely in Asia through grants

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enhacne economic development through no-subsidized loans ( at market interest rates )

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enhance economic development through lo-interest rate loans ( below - market rates )

Question 8

The World Bank was established to

Accepted Answer

enhacne economic development through no-subsidized loans ( at market interest rates )

Answer

enhance development solely in Asia through grants

Answer

enhance economic development through lo-interest rate loans ( below - market rates )

Answer

enhance economic development of the private sector through investment in stock of corporations

Question 9

The International Development Association was established to:

Accepted Answer

enhance economic development through lo-interest rate loans ( below - market rates )

Answer

enhance development solely in Asia through grants

Answer

enhacne economic development through no-subsidized loans ( at market interest rates )

Answer

enhance economic development of the private sector through investment in stock of corporations

Question 10

Which of the following would likely have the least direct influence on a country's current account

Accepted Answer

a tax on income earned from foreign stocks

Answer

inflation

Answer

national income

Answer

exchange rates

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tariffs

Question 11

The 'J curve' effect describes

Accepted Answer

the short-run tendency for a country's balance of trade to deteriorate even while its currency is depreciating

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the continuous long-term inverse relationship btw a country's current account balance and the country's growth in gross national product

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the tendency for exporters to initially reduce the price of goods when their own currency appreciates

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the reaction of a country's currency to initially depreciate after the country's inflation rate declines

Question 12

An increase in the use of quotas is expected to

Accepted Answer

increase the country's current account balance, if other governments do not retaliate

Answer

reduce the country's current account balance, if other governments do not retaliate

Answer

have no impact on the country's current account balance unless other governments retaliate

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increase the volume of a country's trade with other countries

Question 13

The U.S typically has a balance-of-trade surplus in its trade with_____

Accepted Answer

none of the above

Answer

China

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Japan

Answer

A and B

Question 14

the North American Free Trade Agreement (NAFTA) increased restrictions on

Accepted Answer

none of the above

Answer

trade btw Canada and Mexico

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trade btw Canada and U.S

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direct foreign investment in Mexico by U.S firms

Question 15

According to the text, international trade (exports plus imports combined) as a percentage of GDP is

Accepted Answer

lower in the U.S than in European countries

Answer

higher in the U.S than in European countries

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higher in the U.S than in about half the European countries, and lower in the U.S than the others

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about the same in the U.S as in European countries

Question 16

the direct foreign investment positions by U.S firms have generally_____over time; the direct foreign investment positions in the U.S by non-U.S firms have generally _____over time.

Accepted Answer

increased; increased

Answer

increased; decreased

Answer

decreased; decreased

Answer

decreased; increased

Question 17

which of the following is the biggest target of direct foreign investment by U.S firms

Accepted Answer

United Kingdom

Answer

Mexico

Answer

Japan

Answer

Germany

Question 18

the primary component of the current account is the

Accepted Answer

balance of trade

Answer

balance of money market flows

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balance of capital market flows

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unilateral transfers

Question 19

As a result of the European Union, restrictions on exports btw _____ were reduced or eliminated

Accepted Answer

member countries

Answer

member countries and the U.S

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member countries and European non-members

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none of the above

Question 20

Over the last several years, international trade (exports plus imports) as a percentage of GDP has generally

Accepted Answer

increased for most major countries

Answer

decreased for most major countries

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stayed about constant for most major countries

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increased for about half the major countries and decreased for the others

Question 21

which is not a concern about the NAFTA

Accepted Answer

its impact on U.S inflation

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its impact on U.S unemployment

Answer

lower environmental standards in Mexico

Answer

different health laws for workers in Mexico

Question 22

a General Agreement on Tariff and Trade (GATT) accord in 1993 called for

Accepted Answer

lower trade restrictions around the world

Answer

increased trade restrictions outside of North America

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uniform environmental standards around the world

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uniform worker health laws

Question 23

Which of the following is mentioned in the text as a possible means by which the government may attempt to improve its balance of trade position (increase its exports or reduce its imports)

Accepted Answer

It could attempt to strengthen its local currency value

Answer

Firms based in a country receive subsidies frome their gorvenment, produce products, and then export those products at a cheap price

Answer

Firms based in on country are allowed by their goverment to offer bribes to large customers when pursuing business deals in a particular industry

Answer

All of the above are mentioned

Question 24

the demand for U.S exports tends to increase when

Accepted Answer

the currencies for foreign countries strengthen against the dollar

Answer

economic growth in foreign countries decreases

Answer

U.S inflation rises

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non of the above

Question 25

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

Accepted Answer

foreign companies may reduce the prices of their products to stay competitive

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it reduce the prices of imports paid by local companies

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its increase the prices of exports by local companies

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its prevents international trade transactions from being prearranged

Question 26

______ is (are) income received by investors on foreign investments in financial assets ( securities)

Accepted Answer

Factor income

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Portfolio income

Answer

Direct foreign income

Answer

Unilateral transfers

Question 27

'Dumping' is used in the text to represent the :

Accepted Answer

exporting of goods at prices below cost

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exporting of goods that do not meet quality standards

Answer

sales of junk bonds to foreign countries

Answer

removal of foreign subsidiaries by host government

Question 28

intracompany trade makes up approximately_____percent of all international trade:

Accepted Answer

50

Answer

70

Answer

25

Answer

13

Answer

5

Question 29

like the International Monetary fund (IMF), the ____ is composed of a collection of nation as members. However, unlike the IMF, it uses the private rather than the government sector to achieve its objectives

Accepted Answer

International Financial Corporation (IFC)

Answer

World Bank

Answer

World Trade Organization (WTO)

Answer

International development Association (IDA)

Answer

Bank for International Settlements (BIS)

Question 30

also known as the 'central banks', the _____ attempts to facilitate cooperation among countries with regard to international transactions and provides assistance to countries experiencing a financial crisis

Accepted Answer

Bank for International Settlements (BIS)

Answer

World Bank

Answer

International Financial Corporation (IFC)

Answer

World Trade Organization (WTO)

Answer

International development Association (IDA)

Question 31

the World Bank's Multilateral Investment Guarantee Agency (MIGA)

Accepted Answer

offers various forms of political risk insurance

Answer

offers various forms of export insurance

Answer

offers various forms of import insurance

Answer

offers various forms of exchange rate risk insurance

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provides loans to developing countries

Question 32

direct foreign investment into the U.S represents a____

Accepted Answer

capital inflow

Answer

trade inflow

Answer

capital outflow

Answer

trade outflow

Question 33

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

Accepted Answer

does; does

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does; does not

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does not; does not

Answer

does not; does

Question 34

In recent years, the U.S has had a relatively (compared to other countries)_____balance of trade______with China

Accepted Answer

large; deficit

Answer

small; surplus

Answer

large; surplus

Answer

small; deficit

Question 35

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

Accepted Answer

False

Answer

True

Question 36

a weakening of the U.S dollar with respect to the British pound would likely reduce the U.S exports to Britain and increase U.S imports from Britain over time

Accepted Answer

False

Answer

True

Question 37

the World Bank extends loans only to developed nations, while the International Development Association (IDA) extends loans only to developing nations

Accepted Answer

False

Answer

True

Question 38

the World Bank frequently enters into co-financing agreements. Under these agreements, financing is provided by the World Bank and/or official aid agencies, export credit agencies, or commercial banks

Accepted Answer

True

Answer

False

Question 39

The balance of payments is a measurement of all transactions btw domestic and foreign residents over a specified period of time

Accepted Answer

True

Answer

False

Question 40

Changes in country ownership of long-term and short-term assets are measured in the balance of payments with the capital account

Accepted Answer

True

Answer

False

Question 41

Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) btw countries that do not affect the transfer of control

Accepted Answer

True

Answer

False

Question 42

The current account represents the investment in fixed assets in foreign countries that can be used to conduct business operations

Accepted Answer

False

Answer

True

Question 43

Exporting of products by one country to other countries at prices below cost is called elasticity 'dumping'

Accepted Answer

False

Answer

True

Question 44

Direct foreign investment by U.S.-based MNCs occurs primarily in the Bahamas and Brazil

Accepted Answer

False

Answer

True

Question 45

The J curve effect is the initial worsening of the U.S trade balance due to a weakening dollar because of established trade relationship that are not easily changed; as the dollar weakens, the dollar value of imports initially rise before the U.S trade balance is improved

Accepted Answer

True

Answer

False

Question 46

Intracompany trade represents the exporting of products by one country to other countries below cost purchase products from its subsidiaries

Accepted Answer

False

Answer

True

Question 47

A tariff is a maximum limit on imports

Accepted Answer

False

Answer

True

Question 48

The sale of patent rights by a U.S firm to a Russian firm reflects a credit to the U.S balance of payments account

Accepted Answer

True

Answer

False

Question 49

Regarding the U.S balance of payments, capital account items are relatively minor compared to the financial account item

Accepted Answer

True

Answer

False

Question 50

The Central American Trade Agreement (CAFTA) is intended to raise tariffs and regulations btw the U.S, the Dominican Republic, and Central American countries

Accepted Answer

False

Answer

True

Question 51

In July 2005, China shifted its exchange rate system so that the yuan was allowed to fluctuate within limits

Accepted Answer

True

Answer

False

Question 52

In July 2005, China established a new currency to replace the yuan

Accepted Answer

False

Answer

True

Question 53

The primary component of the capital account is the balance of trade.

Accepted Answer

False

Answer

True

Question 54

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

Accepted Answer

False

Answer

True

Question 55

An American tourist visiting Germany and spending money there (for lodging, food, etc.) will reduce the U.S. current account deficit and reduce Germany's current account balance.

Accepted Answer

False

Answer

True

Question 56

The capital account reflects changes in country ownership of long-term (but not short-term) assets.

Accepted Answer

False

Answer

True

Question 57

A weakening of the U.S. dollar with respect to the British pound would likely reduce U.S. exports to the U.K. and increase U.S. imports from the U.K

Accepted Answer

False

Answer

True

Question 58

The World Bank extends loans only to developed nations, while the International Development Association (IDA) extends loans only to developing nations.

Accepted Answer

False

Answer

True

Question 59

A balance of trade deficit indicates an excess of imports over exports.

Accepted Answer

True

Answer

False

Question 60

Outsourcing allows some MNCs to reduce costs but shifts jobs to other countries.

Accepted Answer

True

Answer

False

Question 61

Assume the U.S has a balance of trade surplus with the Country of Thor. When individuals in Thor manuafacture CDs and DVDs that look almost exactly like the original product produced in th U.S and other countries, they ____ the U.S balance of trade surplus with Thor. This activity is called

Accepted Answer

reduce; pirating

Answer

reduce; flipping

Answer

increase; pirating

Answer

increase; flipping

Question 62

Japan's annual interest rate has been relatively______ compared to other countries for several years, because the supply of funds in its credit market has been very_____

Accepted Answer

low; large

Answer

low; small

Answer

high; small

Answer

high; large

Question 63

Without the international capital flows, there would be______ funding available in the U.S. across levels, and the cost of funding would be_____all risk regardless of the firm's risk level.

Accepted Answer

less; higher

Answer

more; lower

Answer

more; higher

Answer

less; lower

Question 64

The____is the difference between exports and imports.

Accepted Answer

balance of trade

Answer

balance on goods and services

Answer

balance of payments

Answer

current account

Answer

capital account

C222

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