International Finance Quiz

The Balance of Payments (BOP) is best described as:

• A record of only goods traded internationally

• A comprehensive record of all economic transactions between a country and the rest of the world

• A quarterly report on stock market performance

• A government budget document

In the Current Account, a trade surplus occurs when:

• Imports equal exports

• Exports exceed imports

• Imports are less than 50% of total trade

• Foreign investments are high

The Real Effective Exchange Rate (REER) primarily measures:

• Nominal exchange rates only

• A currency's value adjusted for inflation against trading partners

• Stock market performance

• Government debt levels

When a country's REER increases, this typically suggests:

• Increased international competitiveness

• Goods becoming relatively cheaper

• Goods becoming relatively more expensive

• Stable inflation rates

The Financial Account of BOP includes:

• Only government transfers

• Trade of physical goods

• Direct and portfolio investments

• Remittance payments

A current account deficit might lead to:

• Currency appreciation

• Currency depreciation

• Increased foreign investment

• Reduced government spending

Which factor does NOT directly affect Balance of Payments:

• Exchange rates

• Interest rates

• Average citizen's height

• Political stability

The Capital Account primarily deals with:

• Regular trade transactions

• Transfers of capital assets between countries

• Corporate earnings

• Consumer spending

REER calculation involves:

• Only nominal exchange rates

• Nominal exchange rates, inflation rates, and trade weights

• Stock market indices

• Government budget allocations

An increase in foreign direct investment typically:

• Weakens domestic currency

• Strengthens domestic currency

• Has no impact on currency value

• Reduces government revenue