FINC400 Suppose the InBev Corporation (a non-U.S. MNC) buys the Anheuser-Busch Corporation, paying t

Over half of all dollar bills in circulation are held outside American's borders. True False

TRUE

The current account balance, which is the difference between a country's exports and imports, is a component of the country's GNP. Other components of GNP include A. consumption and investment and government expenditure. B. consumption and government expenditure and net exports. C. consumption and net exports and government expenditure. D. consumption less imports.

A

If the United States imports more than it exports, then this means that A. the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. B. the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus. C. the U.S. dollar would be under pressure to appreciate against other currencies. D. both b and c are correct

A

Balance of payments A . is defined as the statistical record of a country's international transactions over a certain period of time presented in the form of a double-entry bookkeeping. B. provides detailed information concerning the demand and supply of a country's currency. C. can be used to evaluate the performance of a country in international economic competition. D. all of the above

D

If a country is grappling with a major balance-of-payment difficulty, it may not be able to expand imports from the outside world. Instead, the country may be tempted to A. impose measures to restrict imports. B. impose measures to discourage capital outflows. C. Both a and b D. None of the above

C

. If the United States imports more than it exports, then A. the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. B. one can infer that the U.S. dollar would be under pressure to depreciate against other currencies. C. a and b D. None of the above

C

Generally speaking, any transaction that results in a receipt from foreigners A. will be recorded as a debit, with a negative sign, in the U.S. balance of payments. B. will be recorded as a debit, with a positive sign, in the U.S. balance of payments. C. will be recorded as a credit, with a negative sign, in the U.S. balance of payments. D. will be recorded as a credit, with a positive sign, in the U.S. balance of payments

D

Generally speaking, any transaction that results in a payment to foreigners A. will be recorded as a debit, with a negative sign, in the U.S. balance of payments. B. will be recorded as a debit, with a positive sign, in the U.S. balance of payments. C. will be recorded as a credit, with a negative sign, in the U.S. balance of payments. D. will be recorded as a credit, with a positive sign, in the U.S. balance of payments

A

. If Japan exports more than it imports, then A. the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. B. one can infer that the yen would be likely to appreciate against other currencies. C. a and b D. None of the above

B

The balance of payments records A. only international trade, (exports and imports). B. only cross-border investments (FDI and portfolio investment). C. not only international trade, (exports and imports) but also cross-border investments. D. none of the above

C

Credit entries in the U.S. balance of payments A. result from foreign sales of U.S. goods and services, goodwill, financial claims, and real assets. B. result from U.S. purchases of foreign goods and services, goodwill, financial claims, and real assets. C. give rise to the demand for dollars. D. give rise to the supply of dollars. E. both a and c

E

A country experiencing a significant balance-of-payments surplus would be likely to A. expand imports, offering marketing opportunities for foreign enterprises. B. refrain from imposing foreign exchange restrictions. C. expand exports, offering international marketing opportunities for domestic enterprises. D. Both a and b

D

. Suppose the McDonalds Corporation imports Canadian beef, paying for it by transferring the funds to a New York bank account kept by the Canadian beef producer. A. Payment by McDonalds will be recorded as a debit. B. The deposit of the funds by the seller will be recorded as a debit. C. Payment by McDonalds will be recorded as a credit. D. The deposit of the funds by the buyer will be credit

A

Since the balance of payments is presented as a system of double-entry bookkeeping, A. every credit in the account is balanced by a matching debit. B. every debit in the account is balanced by a matching credit. C. answers a and b are both true D. none of the above

C

Suppose the InBev Corporation (a non-U.S. MNC) buys the Anheuser-Busch Corporation, paying the U.S. shareholders cash. A. Payment by InBev will be recorded as a debit. B. The deposit of the funds by the sellers will be recorded as a debit. C. Payment by InBev will be recorded as a credit. D. The deposit of the funds by the buyer will be credit.

C

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

A country with a current account surplus A. acquires IOUs from foreigners, thereby increasing its net foreign wealth. B. must borrow from foreigners or draw down on its previously accumulated foreign wealth. C. will experience a reduction in the country's net foreign wealth. D. both b and c

A

. 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

B

The official reserve 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

C

A country's international transactions can be grouped into the following three main types: A. current account, medium term account, and long term capital account. B. current account, long term capital account, and official reserve account. C. current account, capital account, and official reserve account. D. capital account, official reserve account, trade account.

C

. Invisible trade refers to A. services that avoid tax payments. B. the underground economy. C. legal, consulting, and engineering services. D. tourist expenditures, only.

C

A country that gives foreign aid to another country can be viewed as A. importing goodwill from the latter. B. exporting goodwill to the latter

A

In 2012 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

C

The current account is divided into four finer categories: A. merchandise trade, services, factor income, and statistical discrepancy. B. merchandise trade, services, factor income, and unilateral transfers. C. merchandise trade, services, portfolio investment, and unilateral transfers. D. merchandise trade, services, factor income, and direct investment.

B

The factors of production are A. land, labor, capital, and entrepreneurial ability. B. interest, wages and dividends. C. payments and receipts of interest, dividends, and other income on foreign investments that were previously made. D. none of the above

A

Factor income A. consists largely of interest, dividends, and other income on foreign investments. B. is a theoretical construct of the factors of production, land, labor, capital, and entrepreneurial ability. C. is generally a very minor part of national income accounting, smaller than the statistical discrepancy. D. none of the above

A

The entries in the "current account" and the "capital account", combined together, can be outlined (in alphabetic order) as: (i) - direct investment (ii) - factor income (iii) - merchandise (iv) - official transfer (v) - other capital (vi) - portfolio investment (vii) - private transfer (viii) - services 27. Current account includes A. (i), (ii), and (iii) B. (ii), (iii), and (vii) C. (iv), (v), and (vii) D. (i), (v), and (vi)

B

Capital account includes A. (i), (ii), and (iii) B. (ii), (iii), and (vii) C. (iv), (v), and (vii) D. (i), (v), and (vi)

D

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 "J-curve effect" A. happens most of the time, in the short run. B. actually only occurs in about 40 percent of the cases according to a study by Sebastian Edwards. C. is a long-run phenomenon, not a short-run one. D. none of the above

B

The J-curve effect received wide attention when A. the British trade balance worsened after a strengthening of the pound in 1967. B. the British trade balance worsened after a devaluation of the pound in 1967. C. the British trade balance improved after a devaluation of the pound in 1967. D. none of the above

B

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

B

When a country's currency depreciates against the currencies of major trading partners, A. the country's exports tend to rise and imports fall. B. the country's exports tend to fall and imports rise. C. the country's exports tend to rise and imports rise. D. the country's exports tend to fall and imports fall

A

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. b and c

A

In the short run a currency depreciation can make a trade balance worse if A. there is no domestic producer of an import. B. there is no domestic buyer for an import. C. there is no export market for a country's outpu

A