國際金融學練習題：Lecture 3 and 4

Chapter03

BalanceofPayments

True/FalseQuestions

1.OverhalfofalldollarbillsincirculationareheldoutsideAmerican'sborders.

TrueFalse

MultipleChoiceQuestions

2.Thecurrentaccountbalance,whichisthedifferencebetweenacountry'sexportsandimports,

isacomponentofthecountry'sGNP.OthercomponentsofGNPinclude

A.consumptionandinvestmentandgovernmentexpenditure.

B.consumptionandgovernmentexpenditureandnetexports.

C.consumptionandnetexportsandgovernmentexpenditure.

D.consumptionlessimports.

3.IftheUnitedStatesimportsmorethanitexports,thenthismeansthat

A.thesupplyofdollarsislikelytoexceedthedemandintheforeignexchangemarket,ceteris

paribus.

B.thedemandfordollarsislikelytoexceedthesupplyintheforeignexchangemarket,ceteris

paribus.

C.theU.S.dollarwouldbeunderpressuretoappreciateagainstothercurrencies.

D.bothb)andc)arecorrect

4.Balanceofpayments

A.isdefinedasthestatisticalrecordofacountry'sinternationaltransactionsoveracertain

periodoftimepresentedintheformofadouble-entrybookkeeping.

B.providesdetailedinformationconcerningthedemandandsupplyofacountry'scurrency.

C.canbeusedtoevaluatetheperformanceofacountryininternationaleconomiccompetition.

D.alloftheabove

5.Ifacountryisgrapplingwithamajorbalance-of-paymentdifficulty,itmaynotbeableto

expandimportsfromtheoutsideworld.Instead,thecountrymaybetemptedto

A.imposemeasurestorestrictimports.

B.imposemeasurestodiscouragecapitaloutflows.

C.Botha)andb)

D.Noneoftheabove

6.IftheUnitedStatesimportsmorethanitexports,then

A.thesupplyofdollarsislikelytoexceedthedemandintheforeignexchangemarket,ceteris

paribus.

B.onecaninferthattheU.S.dollarwouldbeunderpressuretodepreciateagainstother

currencies.

C.a)andb)

D.Noneoftheabove

7.Generallyspeaking,anytransactionthatresultsinareceiptfromforeigners

A.willberecordedasadebit,withanegativesign,intheU.S.balanceofpayments.

B.willberecordedasadebit,withapositivesign,intheU.S.balanceofpayments.

C.willberecordedasacredit,withanegativesign,intheU.S.balanceofpayments.

D.willberecordedasacredit,withapositivesign,intheU.S.balanceofpayments.

8.Generallyspeaking,anytransactionthatresultsinapaymenttoforeigners

A.willberecordedasadebit,withanegativesign,intheU.S.balanceofpayments.

B.willberecordedasadebit,withapositivesign,intheU.S.balanceofpayments.

C.willberecordedasacredit,withanegativesign,intheU.S.balanceofpayments.

D.willberecordedasacredit,withapositivesign,intheU.S.balanceofpayments.

9.IfJapanexportsmorethanitimports,then

A.thesupplyofdollarsislikelytoexceedthedemandintheforeignexchangemarket,ceteris

paribus.

B.onecaninferthattheyenwouldbelikelytoappreciateagainstothercurrencies.

C.a)andb)

D.Noneoftheabove

10.Thebalanceofpaymentsrecords

A.onlyinternationaltrade,(exportsandimports).

B.onlycross-borderinvestments(FDIandportfolioinvestment).

C.notonlyinternationaltrade,(exportsandimports)butalsocross-borderinvestments.

D.noneoftheabove

11.CreditentriesintheU.S.balanceofpayments

A.resultfromforeignsalesofU.S.goodsandservices,goodwill,financialclaims,andreal

assets.

B.resultfromU.S.purchasesofforeigngoodsandservices,goodwill,financialclaims,andreal

assets.

C.giverisetothedemandfbrdollars.

D.giverisetothesupplyofdollars.

E.botha)andc)

12.Acountryexperiencingasignificantbalance-of-paymentssurpluswouldbelikelyto

A.expandimports,offeringmarketingopportunitiesforforeignenterprises.

B.refrainfromimposingforeignexchangerestrictions.

C.expandexports,offeringinternationalmarketingopportunitiesfordomesticenterprises.

D.Botha)andb)

13.SupposetheMcDonaldsCorporationimportsCanadianbeef,payingfbritbytransferring

thefundstoaNewYorkbankaccountkeptbytheCanadianBeefproducer.

A.PaymentbyMcDonaldswillberecordedasadebit.

B.Thedepositofthefundsbythesellerwillberecordedasadebit.

C.PaymentbyMcDonaldswillberecordedasacredit.

D.Thedepositofthefundsbythebuyerwillbecredit.

14.Sincethebalanceofpaymentsispresentedasasystemofdouble-entrybookkeeping,

A.everycreditintheaccountisbalancedbyamatchingdebit.

B.everydebitintheaccountisbalancedbyamatchingcredit.

C.answersa)andb)arebothtrue

D.noneoftheabove

15.SupposetheInBevCorporation(anon-U.S.MNC)buystheAnheuser-BuschCorporation,

payingtheU.S.shareholderscash.

A.PaymentbyInBevwillberecordedasadebit.

B.Thedepositofthefundsbythesellerswillberecordedasadebit.

C.PaymentbyInBevwillberecordedasacredit.

D.Thedepositofthefundsbythebuyerwillbecredit.

16.Thecurrentaccountincludes

A.theexportandimportofgoodsandservices.

B.allpurchasesandsalesofassetssuchasstocks,bonds,bankaccounts,realestate,and

businesses.

C.allpurchasesandsalesofinternationalreserveassetssuchasdollars,foreignexchanges,

gold,andspecialdrawingrights(SDRs).

D.noneoftheabove

17.Acountrywithacurrentaccountsurplus

A.acquireslOUsfromforeigners,therebyincreasingitsnetforeignwealth.

B.mustborrowfromforeignersordrawdownonitspreviouslyaccumulatedforeignwealth.

C.willexperienceareductioninthecountry'snetforeignwealth.

D.bothb)andc)

18.Thecapitalaccountincludes

A.theexportandimportofgoodsandservices.

B.allpurchasesandsalesofassetssuchasstocks,bonds,bankaccounts,realestate,and

businesses.

C.allpurchasesandsalesofinternationalreserveassetssuchasdollars,foreignexchanges,

gold,andspecialdrawingrights(SDRs).

D.noneoftheabove

19.Theofficialreserveaccountincludes

A.theexportandimportofgoodsandservices.

B.allpurchasesandsalesofassetssuchasstocks,bonds,bankaccounts,realestate,and

businesses.

C.allpurchasesandsalesofinternationalreserveassetssuchasdollars,foreignexchanges,

gold,andspecialdrawingrights(SDRs).

D.noneoftheabove

20.Acountry'sinternationaltransactionscanbegroupedintothefollowingthreemaintypes:

A.currentaccount,mediumtermaccount,andlongtermcapitalaccount.

B.currentaccount,longtermcapitalaccount,andofficialreserveaccount.

C.currentaccount,capitalaccount,andofficialreserveaccount.

D.capitalaccount,officialreserveaccount,tradeaccount.

21.Invisibletraderefersto

A.servicesthatavoidtaxpayments.

B.theundergroundeconomy.

C.legal,consulting,andengineeringservices.

D.touristexpenditures,only.

22.Acountrythatgivesforeignaidtoanothercountrycanbeviewedas

A.importinggoodwillfromthelatter.

B.exportinggoodwilltothelatter.

23.In2007theUnitedStateshadacurrentaccountdeficit.Thecurrentaccountdeficitimplies

thattheUnitedStates

A.hadasurplusonlegalconsultingandengineeringservices.

B.producedmoreoutputthanitconsumed.

C.consumedmoreoutputthanitproduced.

D.noneoftheabove

24.Thecurrentaccountisdividedintofourfinercategories:

A.merchandisetrade,services,factorincome,andstatisticaldiscrepancy.

B.merchandisetrade,services,factorincome,andunilateraltransfers.

C.merchandisetrade,services,portfolioinvestment,andunilateraltransfers.

D.merchandisetrade,services,factorincome,anddirectinvestment.

25.Thefactorsofproductionare

A.land,labor,capital,andentrepreneurialability.

B.interest,wagesanddividends.

C.paymentsandreceiptsofinterest,dividends,andotherincomeonforeigninvestmentsthat

werepreviouslymade.

D.noneoftheabove

26.Factorincome

A.consistslargelyofinterest,dividends,andotherincomeonforeigninvestments.

B.isatheoreticalconstructofthefactorsofproduction,land,labor,capital,andentrepreneurial

ability.

C.isgenerallyaveryminorpartofnationalincomeaccounting,smallerthanthestatistical

discrepancy.

D.noneoftheabove

Theentriesinthe"currentaccount"andthe"capitalaccount",combinedtogether,canbe

outlined(inalphabeticorder)as:

(i)-directiiixesbnent(v)?othei-capital

(ii)-factorincome(\i)-poitfbEoinvestment

(iii)-merchandise(\ii)-prixatetiaiisfei'

(iv)-officialtiaiisferservices

27.Currentaccountincludes

A.(i),(ii),and(iii)

B.(ii),(iii),and(vii)

C.(iv),(v),and(vii)

D.(i),(v),and(vi)

28.Capitalaccountincludes

A.(i),(ii),and(iii)

B.(ii),(iii),and(vii)

C.(iv),(v),and(vii)

D.(i),(v),and(vi)

29.ThenJ-curveeffect"shows

A.theinitialdeteriorationandtheeventualimprovementofacountry'stradebalancefollowing

acurrencydepreciation.

B.theinitialimprovementandtheeventualdepreciationofacountry'stradebalancefollowing

acurrencydepreciation.

C.thetradebalance'slackofresponsivenesstotheexchangesratechanges.

D.noneoftheabove

3().The"J-curveeffect11

A.happensmostofthetime,intheshortrun.

B.actuallyonlyoccursinabout40percentofthecasesaccordingtoastudybySebastian

Edwards.

C.isalong-runphenomenon,notashort-runone.

D.noneoftheabove.

31.TheJ-curveeffectreceivedwideattentionwhen

A.theBritishtradebalanceworsenedafterastrengtheningofthepoundin1967.

B.theBritishtradebalanceworsenedafteradevaluationofthepoundin1967.

C.theBritishtradebalanceimprovedafteradevaluationofthepoundin1967.

D.noneoftheabove

32.Acurrencydepreciationwillbegintoimprovethetradebalanceimmediately

A.ifthedemandforimportsandexportsareinelastic.

B.ifthedemandforimportsandexportsareelastic.

C.ifimportsdecreaseandexportsdecrease.

D.noneoftheabove

33.Whenacountry*scurrencydepreciatesagainstthecurrenciesofmajortradingpartners,

A.thecountry*sexportstendtoriseandimportsfall.

B.thecountry'sexportstendtofallandimportsrise.

C.thecountry'sexportstendtoriseandimportsrise.

D.thecountry'sexportstendtofallandimportsfall.

34.Adepreciationwillbegintoimprovethetradebalanceimmediatelyif

A.importsandexportsareresponsivetotheexchangeratechanges.

B.importsandexportsareinelastictotheexchangeratechanges.

C.consumersexhibitbrandloyaltyandpriceinelasticity.

D.b)andc)

35.Intheshortrunacurrencydepreciationcanmakeatradebalanceworseif

A.thereisnodomesticproducerofanimport.

B.thereisnodomesticbuyerforanimport.

C.thereisnoexportmarketforacountry*soutput.

36.WhatisthecorrectlabelfortheverticalaxisintheJ-curve?

A.Time

B.ChangeintheTradeBalance

C.SizeofTradeBalance

D.SizeofMerchandiseTradeBalance

37.Inthelongrun,bothexportsandimportstendtobe

A.unresponsivetochangesinexchangerates.

B.responsivetochangesinexchangerates.

C.botha)andb)

D.noneoftheabove

38.Withregardtothecapitalaccount

A.thecapitalaccountbalancemeasuresthedifferencebetweenU.S.salesofassetsto

foreignersandU.S.purchasesofforeignassets.

B.U.S.sales(orexports)ofassetsarerecordedascredits,astheyresultincapitalinflow.

C.U.S.purchases(imports)offoreignassetsarerecordedasdebits,astheyleadtocapital

outflow.

D.alloftheabove

39.ThedifferencebetweenForeignDirectInvestmentandPortfolioInvestmentisthat

A.PortfolioInvestmentmostlyrepresentsthesaleandpurchaseofforeignfinancialassetssuch

asstocksandbondsthatdonotinvolveatransferofcontrol.

B.ForeignDirectInvestmentmostlyrepresentsthesaleandpurchaseofforeignfinancialassets

suchasstockswhereasPortfolioInvestmentmostlyinvolvesthesalesandpurchaseofforeign

bonds.

C.ForeignDirectInvestmentisaboutbuyinglandandbuildingfactories,whereasportfolio

investmentisaboutbuyingstocksandbonds.

D.Alloftheabove

40.Inthelatterhalfofthe1980s,withastrongyen,Japanesefirms

A.faceddifficultyexporting.

B.couldbetteraffordtoacquireU.S.assetsthathadbecomelessexpensiveintermsofyen.

C.financedasharpincreaseinJapaneseFDIintheUnitedStates.

D.alloftheabove

41.Internationalportfolioinvestmentshaveboomedinrecentyears,asaresultof

A.adepreciatingU.S.dollar.

B.increasedgasolineandothercommodityprices.

C.thegeneralrelaxationofcapitalcontrolsandregulationinmanycountries.

D.noneoftheabove

42.IftheinterestraterisesintheU.S.whileothervariablesremainconstant

A.capitalinflowsintotheU.S.willincrease.

B.capitalinflowsintotheU.S.maynotmaterialize.

C.capitalwillflowoutoftheU.S.

D.noneoftheabove

43.Ifforaparticularcountyanincreaseintheinterestrateismoreorlessmatchedbyan

expecteddepreciationinthelocalcurrency,

A.traderswillprobablybetemptedtofindanothercountrytoinvestin.

B.theinterestrateincreasepersewillnotbeenoughtosparkcapitalflowintothecountry.

C.botha)andb)aretrue

D.capitalwillglowoutofthecountryasthedisgruntledcitizensriotandgotowarwiththe

neighbors.

44.Thecapitalaccountmeasures

A.thesumofU.S.salesofassetstoforeignersandU.S.purchasesofforeignassets.

B.thedifferencebetweenU.S.salesofassetstoforeignersandU.S.purchasesofforeignassets.

C.thedifferencebetweenU.S.salesofmanufacturedgoodstoforeignersandU.S.purchasesof

foreignproducts.

D.noneoftheabove

45.WhenHonda,aJapaneseautomaker,builtafactoryinOhio,

A.itwasengagedinforeigndirectinvestment.

B.itwasengagedinportfolioinvestment.

C.itwasengagedinacross-borderacquisition.

D.noneoftheabove.

46.Governmentcontrolledinvestmentfunds,knownassovereignwealthfunds,

A.areplayingaless-importantroleininternationalfinancefollowingtheendofthefixed

exchangerateera.

B.aremostlydomiciledinAsianandMiddleEasterncountries.

C.areusuallyresponsibleforconvertingtradesurplusesandoilrevenuesintoforeignexchange

reserves.

D.noneoftheabove

47.Foreigndirectinvestment(FDI)occurs

A.whenaninvestoracquiresameasureofcontrolofaforeignbusiness.

B.whenthereisanacquisition,byaforeignentityintheU.S.,of10percentormoreofthe

votingsharesofabusiness.

C.withsalesandpurchasesofforeignstocksandbondsthatdonotinvolveatransferofcontrol.

D.botha)andb)

48.Thecapitalaccountmaybedividedintothreecategories:

A.cross-bordermergersandacquisitions,portfolioinvestment,andotherinvestment.

B.directinvestment,portfolioinvestment,andCross-bordermergersandacquisitions.

C.directinvestment,mergersandacquisitions,andotherinvestment.

D.directinvestment,portfolioinvestment,andotherinvestment.

49.WhenNestle,aSwissfirm,boughttheAmericanfirmCarnation,itwasengagedinforeign

directinvestment.IfNestlehadonlyboughtanon-controllingnumberofsharesofthefirm,

A.Nestlewouldhavebeenengagedinportfolioinvestment.

B.Nestlewouldhavebeenengagedinacross-borderacquisition.

C.itwoulddependiftheyboughtthesharesfromanAmericanoraCanadian.

D.noneoftheabove

50.Transactionsincurrency,bankdepositsandsoforth

A.tendtobeinsensitivetobothchangesinrelativeinterestratesandtheanticipatedchangein

exchangerate.

B.tendtobesensitivetobothchangesinrelativeinterestratesandtheanticipatedchangein

exchangerate.

C.tendtobesensitivetochangesinrelativeinterestratesbutinsensitivetotheanticipated

changeinexchangerate.

D.tendtobeinsensitivetochangesinrelativeinterestratesbutsensitivetotheanticipated

changeinexchangerate.

51.Sincesecurityreturnstendtohavelowcorrelationsamongcountries,

A.investorscanreduceriskmoreeffectivelyiftheydiversifytheirportfolioholdings

internationallyratherthanpurelydomestically.

B.investorswhohaveadomesticallydiversifiedportfolio,withexposuresacrossindustry

typeswillnotgainmuchfromdiversifyingabroad.

C.investorswhodiversifyinternationallywilllikelyunderperforminvestorswhokeepalltheir

investmentsinonecountry.

D.noneoftheabove

52.Theworld'slargestdebtornationandcreditornation,respectively,are

A.JapanandtheU.S.

B.TheU.S.andJapan.

C.TheU.S.andCanada.

D.GreatBritainandMexico.

53.Statisticaldiscrepancy,whichbydefinitionrepresentserrorsandomissions

A.cannotbecalculateddirectly.

B.iscalculatedbytakingintoaccountthebalance-of-paymentsidentity.

C.probablyhassomeelementsthatarehonestmistakes,itcan'tallbemoneylaunderingand

drugs.

D.alloftheabove

54.Thestatisticaldiscrepancyinthebalance-of-paymentsaccounts

A.arisesincerecordingsofpaymentsandreceiptsaredoneatdifferenttimes,indifferent

places,possiblyusingdifferentmethods.

B.arisesincesometransactions(illegaltransactions?)occur"offthebooks".

C.representsomittedandmisrecordedtransactions.

D.alloftheabove

55.Whichofthefollowingismostindicativeofthepressurethatacountry'scurrencyfacesfor

depreciationorappreciation?

A.Thecurrentaccount

B.Thecapitalaccount

C.Thestatisticaldiscrepancies

D.Theofficialsettlementbalance

56.TheUnitedStatesisconsidered

A.anetcreditornation.

B.anetdebtornation.

57.Regardingthestatisticaldiscrepancyinthebalance-of-paymentsaccounts

A.thereissomeevidencethatfinancialtransactionsmaybemainlyresponsibleforthe

discrepancy.

B.thesumofthebalanceonthecapitalaccountandthestatisticaldiscrepancyisverycloseto

thebalanceofthecurrentaccountinmagnitude.

C.ittendstobepositiveoneyearandnegativeinothers,soitssafetoignoreit.

D.a)andb)

58.ThecentralbankoftheUnitedStatesis

A.theNewYorkFed.

B.theFederalReserveSystem.

C.theEXIMbank.

D.noneoftheabove——theU.S.doesnothaveacentralbank.

59.Whenacountrymustmakeanetpaymenttoforeignersbecauseofabalance-of-payments

deficit,thecentralbankofthecountry

A.shoulddonothing.

B.shouldrundownitsofficialreserveassets(e.g.gold,foreignexchanges,andSDRs).

C.shouldborrowanewfromforeigncentralbanks.

D.eitherb)orc)willwork.

60.ContinuedU.S.tradedeficitscoupledwithforeigners*desiretodiversifytheircurrency

holdingsawayfromU.S.dollars

A.couldfurtherdiminishthepositionofthedollarasthedominantreservecurrency.

B.couldaffectthevalueofU.S.dollar(e.g.throughthecurrencydiversificationdecisionsof

Asiancentralbanks).

C.couldlendsteamtotheemergenceoftheeuroasacrediblereservecurrency.

D.alloftheabove

61.Currently,internationalreserveassetsarecomprisedof

A.gold,platinum,foreignexchanges,andspecialdrawingrights(SDRs).

B.gold,foreignexchanges,specialdrawingrights(SDRs),andreservepositionsinthe

InternationalMonetaryFund(IMF).

C.gold,diamonds,foreignexchanges,andspecialdrawingrights(SDRs).

D.reservepositionsintheInternationalMonetaryFund(IMF),only.

62.Internationalreserveassetsinclude"foreignexchanges".Theseare

A.SpecialDrawingRights(SDRs)attheIMF.

B.reservepositionsintheInternationalMonetaryFund(IMF).

C.foreigncurrencyheldbyacountry'scentralbank.

D.noneoftheabove

63.Themostimportantinternationalreserveasset,comprising94percentofthetotalreserve

assetsheldbyIMFmembercountriesis

A.gold.

B.foreignexchanges.

C.specialDrawingRights(SDRs).

D.reservepositionsintheInternationalMonetaryFund(IMF).

64.The"onewordthathauntsthedollar"is

A.(Centralbank)diversification.

B.Reunification(Korean).

C.Euro.

D.(Currentaccount)deficit.

65.Thevastmajorityoftheforeign-exchangereservesheldbycentralbanksaredenominated

in

A.localcurrencies.

B.U.S.dollars.

C.Yen.

D.Euro.

66.AmongIMFmembercountries,thedollar'sdominantpositionintheworld*sreserve

holdingsmaydeclinetoacertainextentastheeurobecomesa"knownquantity"andits

externalvaluebecomesmorestable.Infact,theeuro'ssharehasincreased

A.fromzeropercentin1999to25.8percentin2006.

B.from13.5percentin1999to25.8percentin2006.

C.from13.5percentin1999to52.8percentin2006.

D.noneoftheabove

67.Whichofthefollowingwouldnotcountasaforeign-exchangereserveheldbyacentral

bank?

A.Thelocalcurrency

B.U.S.dollars

C.SDRs

D.Euro

68.ThebalanceofpaymentsidentityisgivenbyBCA+BKA+BRA=0.Rearrangethe

identityforacountrywithapureflexibleexchangerateregime.

A.BCA+BKA+BRA=0

B.BCA=-BKA

C.BCA+BKA=-BRA

D.BRA=-BCA

Assumethatthebalance-of-paymentsaccountsforacountryarerecordedcorrectly.

Balanceonthecurrentaccount=BCA=$130billion

Balanceonthecapitalaccount=BKA=-$86billion

Balanceonthereservesaccount=BRA=?

69.Thebalanceonthereservesaccount(BRA),underthefixedexchangeregimeis

A.-$44billion

B.$44billion

C.$216billion

D.noneoftheabove

70.Thebalanceonthereservesaccount(BRA),underthepureflexibleexchangeregimeis

A.-$44billion.

B.$44billion.

C.$216billion.

D.noneoftheabove

71.Inapureflexibleexchangerateregime,acountry'scentralbankswillnotneedtomaintain

officialreserves.Underthisregime

A.-BCA=BKA.

B.BCA=-BRA=0.

C.BKA=-BRA.

D.BSA=BCA.

72.Whenthebalance-of-paymentsaccountsarerecordedcorrectly,thecombinedbalanceof

thecurrentaccount,thecapitalaccount,andthereservesaccountmustbe

A.equalinmagnitudetothecountry*snationaldebt.

B.zero.

C.equalinmagnitudetotheTradeDeficitorSurplus.

D.noneoftheabove

73.ThebalanceofpaymentsidentityisgivenbyBCA+BKA+BRA=0.Rearrangethe

identitytosolveforthestatisticaldiscrepancy.

A.Thestatisticaldiscrepancy=(BCA+BKA)-BRA

B.Thestatisticaldiscrepancy=BCA-BKA+BRA

C.Thestatisticaldiscrepancy=BCA-BKA-BRA

D.Thestatisticaldiscrepancy=BCA+BKA+BRA

74.BCAstandsfor

A.thebalanceonthecurrentaccount.

B.thebalanceonthecapitalaccount.

C.thebalanceontheofficialreserves.

D.netimports.

75.BKAstandsfor

A.thebalanceonthecurrentaccount.

B.thebalanceonthecapitalaccount.

C.thebalanceontheofficialreserves.

D.netimports.

76.Ifthecentralbanksoftheworldchosetodiversifytheirforeign-exchangereservesaway

fromthedollarandintotheeuro,

A.thiswouldhavetheresultofastrengtheningofthevalueofthedollar.

B.thiswouldhavetheresultofaweakeninginthevalueofthedollar.

C.thiswouldnothavemuchimpact,astheinformationwouldbelostintheday-to-day

volatilityofexchangerates.

77.Theeconomictheoryofmercantilismholdsthat

A.acontinuingtradesurplusshouldbeagovernment'smajorpolicygoal.

B.themainsourceofwealthofacountryisitsproductivecapacity.

C.freetradeistheresultofcountriesexploitingtheircomparativeadvantage.

D.noneoftheabove

78.TheU.S.TradeDeficit

A.isacapitalaccountsurplus.

B.isacurrentaccountdeficit.

C.isbothacapitalaccountsurplusandacurrentaccountdeficit.

D.noneoftheabove

79.Asof2007goldaccountingfor

A.90percentofthetotalreserveassetsheldbyIMFmembercountries.

B.70percentofthetotalreserveassetsheldbyIMFmembercountries.

C.approximately50percentofthetotalreserveassetsheldbyIMFmembercountries.

D.lessthan2percentofthetotalreserveassetsheldbyIMFmembercountries.

8().Themostpopularreservecurrencyisnowthe

A.U.S.dollar.

B.Euro.

C.JapaneseYen.

81.Supposeacountryiscurrentlyexperiencingatradedeficit.Inthelongrun,thiscouldbeself

correctingif

A.thedeficitexistsbecauseoftheimportdemandforcapitalgoods.

B.thedeficitexistsbecauseoftheimportdemandforconsumptiongoods.

C.thedeficitexistsbecauseforeignerswanttobuythecountry'scurrencyasaninvestment.

D.noneoftheabove

82.Thecapitalaccountisdividedintothreesubcategories:directinvestment,portfolio

investment,andotherinvestment.Directinvestmentinvolves.

A.acquisitionsofcontrollinginterestsinforeignbusinesses.

B.investmentsinforeignstocksandbondsthatdonotinvolveacquisitionsofcontrol.

C.bankdeposits,currencyinvestment,tradecredit,andthelike.

D.alloftheabove

83.Thecapitalaccountisdividedintothreesubcategories:directinvestment,portfolio

investment,andotherinvestment.Portfolioinvestmentinvolves

A.acquisitionsofcontrollinginterestsinforeignbusinesses.

B.investmentsinforeignstocksandbondsthatdonotinvolveacquisitionsofcontrol.

C.bankdeposits,currencyinvestment,tradecredit,andthelike.

D.alloftheabove

84.Thecapitalaccountisdividedintothreesubcategories:directinvestment,portfolio

investment,andotherinvestment."Other"investmentinvolves

A.acquisitionsofcontrollinginterestsinforeignbusinesses.

B.investmentsinforeignstocksandbondsthatdonotinvolveacquisitionsofcontrol.

C.bankdeposits,currencyinvestment,tradecredit,andthelike.

D.alloftheabove

85.OverthelastseveralyearstheU.S.hasrunpersistent

A.balance-of-paymentsdeficits.

B.balance-of-paymentssurpluses.

C.currentaccountdeficits.

D.capitalaccountdeficits.

86.Ifacountrymustmakeanetpaymenttoforeignersbecauseofabalance-of-payments

deficit,thecountryshould

A.eitherincreaseitsofficialreserveassetsorborrowanewfromforeigners.

B.eitherrundownitsofficialreserveassetsorborrowanewfromforeigners.

C.eitherrundownitsofficialreserveassetsorlendmoreforeigners.

D.noneoftheabove

87.Underthefixedexchangerateregime

A.thecombinedbalanceonthecurrentandcapitalaccountswillbeequalinsize,butopposite

insign,tothechangeintheofficialreserves.

B.thebalanc