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| 1 | |
In a fixed exchange rate regime, a country can run a balance-of-payments surplus or deficit by increasing or decreasing: |
| | A) | official reserves. |
| | B) | capital account |
| | C) | current account |
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| 2 | |
In a pure flexible exchange rate regime, a country’s central banks will not need to maintain official reserves. Under this regime: |
| | A) | –BCA = BKA. |
| | B) | BCA = – BRA = 0 |
| | C) | BKA = –BRA |
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| 3 | |
In balance-of-payments accounting, a country’s international transactions can be grouped in three main categories: |
| | A) | The current account, the capital account and the federal reserves account. |
| | B) | The government spending account, the capital account and the official reserves account. |
| | C) | The current account, the capital account and the official reserves account |
| | D) | The current account, the capital account and the official reserves account |
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| 4 | |
If the United States imports more than it exports, one can expect: |
| | A) | The U.S. dollar would be likely to appreciate against other currencies. |
| | B) | The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. |
| | C) | The U.S. dollar would be under pressure to depreciate against other currencies. |
| | D) | b) and c) are correct. |
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| 5 | |
The J-curve effect |
| | A) | Shows the initial deterioration and the eventual improvement of the trade balance following a depreciation. |
| | B) | Shows the initial improvement and eventual deterioration of the trade balance following a depreciation. |
| | C) | Shows that both imports and exports are responsive to exchange rate changes, but only in the short run. |
| | D) | None of the above are correct |
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| 6 | |
The capital account |
| | A) | Measures the difference between U.S. exports and imports of goods and services. |
| | B) | Measures the difference between U.S. Sales of assets to foreigners and U.S. purchases of foreign assets. |
| | C) | Measures all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights. |
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| 7 | |
If a country must make a net payment to foreigners because of a balance-of-payments deficit, the country can: |
| | A) | Increase its official reserve assets, such as SDRs. |
| | B) | Borrow anew from foreigners. |
| | C) | Print more currency. |
| | D) | Countries must now buy their currencies back from the World Bank. |
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| 8 | |
Suppose that your U.S. firm imports bicycles from Mercian Bicycles in Derby, England. |
| | A) | The transaction will give rise to a debit in the U.S. balance-of-payments. |
| | B) | The transaction will give rise to a credit in the U.S. balance-of-payments. |
| | C) | Since the value of the bicycles will equal the value of the dollars sent abroad, this will give rise to a neither a debit nor a credit in the U.S. balance-of-payments. |
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| 9 | |
Invisible trade |
| | A) | Is another name for off-the-books or illegal trade. |
| | B) | Is another name for the statistical discrepancy. |
| | C) | Is another name for services. |
| | D) | Is another name for official reserves account. |
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| 10 | |
The world’s largest debtor nation and creditor nation, respectively are: |
| | A) | Japan and the U.S. |
| | B) | The U.S. and Japan |
| | C) | The U.S. and Canada |
| | D) | Great Britain and Mexico |
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