11) Which of the following is NOT a major subaccount of the Balance of Payments?

Question

11) Which of the following is NOT a major subaccount of the Balance of Payments? 11) ______ A) The financial account. B) The current account. C) The capital account. D) The accounts payable. 12) When the world went to a system of floating exchange rates, the Balance of Payments became a relic of a system of fixed exchange rates and is no longer watched by serious economic groups. 12) ______ A) True B) False 13) The balance of payments as applied to a course in international finance may be defined as: 13) ______ A) the amount still owed by an exporting firm after making an initial down payment. B) the amount of a country's merchandise trade deficit or surplus. C) the measurement of all international economic transactions between the residents of a country and foreign residents. D) the amount still owed by governments to the International Monetary Fund. 14) The authors identify a tip for understanding BOP accounting. They recommend that you "follow the cash flow." 14) ______ A) True B) False 15) The ________ includes all international economic transactions with income or payment flows occurring within the year. 15) ______ A) financial account B) current account C) capital account D) IMF account 16) The ________ of the balance of payments measures all international economic transactions of financial assets. 16) ______ A) capital/financial account B) services account C) merchandise trade account D) current account 17) International debt security purchases and sales are defined as portfolio investments for financial account purposes because by definition debt securities do not provide the buyer with ownership or control. 17) ______ A) False B) True 18) The largest single component of the United States current account is ________. 18) ______ A) current transfers B) income payments and receipts C) services imports and exports D) goods (merchandise) imports and exports 19) An excess of merchandise exports over merchandise imports results in a balance of trade deficit. 19) ______ A) False B) True 20) Use the following terms for this question: C = consumption I = capital investment spending G = government spending X = exports of goods and services M = imports of goods and services BOP = balance of payments GDP = gross domestic product NPV = net present value INF = inflation R = real rate of return The static equation for the nations GDP is: 20) ______ A) GDP = C + I + G + X + M B) GDP = C + I + G + (X + M ) x INF C) GDP = C + I + G + X - M D) GDP = C + I + X - M + R 21) An increase in GDP should lead to a decrease in imports. 21) ______ A) True B) False 22) Of the following, which is NOT a part of J-Curve adjustment path? 22) ______ A) The exchange rate pass-through period. B) The currency contract period. C) The quantity adjustment period. D) Each of the above is part of the J-Curve adjustment path. 23) When a currency is devalued the immediate impact may be an increase in a country's trade deficit. However, this situation tend to correct itself in 2 to 5 weeks.. 23) ______ A) True B) False 24) The authors identify four distinct periods of capital mobility since 1860. Which do they term as a "period of global economic destruction"? 24) ______ A) 1945 - 1971 B) 1914 - 1945 C) 1971 - 2007 D) 1860 - 1914 25) The Bretton Woods era realized a great expansion of international trade in goods and services. 25) ______ A) True B) False 26) ________ is the cross-border purchase of assets that are then managed in a way that hides the movement of money and its ownership. 26) ______ A) Capital flight B) Money laundering C) Irrational exuberance D) Capital mobility 27) Which of the following is NOT likely to occur in the quantity adjustment phase of the J-Curve adjustment path ? 27) ______ A) Exports become relatively less expensive. B) Imports become relatively more expensive. C) The balance of trade gets worse. D) All of the above are true. 28) The effect of an imbalance in the BOP is the same for countries on a fixed exchange rate regime as for those on a floating exchange rate regime. 28) ______ A) True B) False 29) Under a floating exchange rate system, the government bears the responsibility to ensure that the BOP is near zero. 29) ______ A) True B) False 30) Imports have the potential to lower a country's inflation rate because of each of the following EXCEPT: 30) ______ A) the higher prices of foreign goods spurs domestic competitors to cut prices. B) the import of lower priced services limits what domestic competitors can charge for services. C) the import of lower priced goods limits what domestic competitors can charge for goods. D) of all of the above 31) The BOP should always balance. 31) ______ A) True B) False 32) Which of the following statements about the balance of payments is NOT true? 32) ______ A) Although the BOP must always balance in theory, in practice there are substantial imbalances as a result of statistical errors and misreporting of current account and financial account flows. B) The BOP is the summary statement of all international transactions between one country and all other countries. C) The BOP is a flow statement, summarizing all international transactions that occur across the geographic borders over a period of time, typically a year. D) All of the above are true. 33) Significant amounts of United States Treasury issues are purchased by foreign investors, therefore the U.S. must earn foreign currency to repay this debt. 33) ______ A) True B) False 34) The financial account consists COMPLETELY of which three components? 34) ______ A) Direct investment, stock investment, and bond investment. B) Direct investment, portfolio investment, and other asset investment. C) Stock investment, bond investment, and mutual fund investment. D) Mutual fund investment, portfolio investment, and stock investment.

Explanation / Answer

11.

Balance if payment is divided in to three main parts:

1.current account

2. Capital account

3. Financial account

Which are further divided into sub parts . So option d is correct.

D. Account payable

12. False

13. Option c

C) the measurement of all international economic transactions between the residents of a country and foreign residents

14. True

15. Option B

Current account

16. Option a

Capital/financial account

17. True

18. Option D

Goods (import and export)

19.false

20. Option C

C) GDP = C + I + G + X - M

21. False

22. Option D

D) Each of the above is part of the J-Curve adjustment path

23. False

24. Option B

1914-1945

25. True

26. Option B

Money laundering

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