1. Factor income from international portfolio management is a component of finan
ID: 2806848 • Letter: 1
Question
1. Factor income from international portfolio management is a component of financial account in the balance of payments True False 2. The forward rate is the exchange rate used for immediate exchange of currencies True False 3. A decrease in USS value against major currencies would the current account balance of U.S. as import and exports a. increase; increase; decrease b. decrease; increase; decrease c. increase; decrease; increase d. decrease; decrease; increase 4. Non-US, firms may issue , which are certificates representing bundles of stock when they sell their stocks in the U.S. stock market. a. Banker's Acceptance b. ADRs c. BWs d. Euro bonds 5. A high home inflation rate relative to other countries would the home country's current account balance, as import and exports a) increase; increase; decrease b) decrease; increase; decrease c) increase; decrease; increase d) decrease; decrease; increase Assume that the inflation rate becomes much higher in the US relative to the Japan. This will place upward pressure on the value of Japanese Yen against USS. (short term) 6. True FalseExplanation / Answer
1. True : The factor income from international portfolio management is a component of financial account of balance of payment account. Financial accouont covers all the factor income from the financial assets.
2. False: fOrward rate is not used for immediate exchange. It is used for the currency exchange at some date in future.
3. Increase, decrease and increae. A decrease in US$ will increase current account balance, decease in imports and increase in exports.Any decrease in value of US$ would make US good cheaper for the rest of the world and the goods of other countires expensive for US. Hwence, the export would increase and import would decrease, as a result in increase of current account balance.
4. ADRs i..e. American depository reciepts. Non US firms may use ADRs which are certificates representing bundles of stock when they sell their stocks in US stock market.
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