Question 1

The World Bank frequently enters into cofinancing agreements, under which it joins with official aid agencies, export credit agencies, or commercial banks in providing financing.

Accepted Answer

A) True 
 B)False

Question 2

Outsourcing allows some MNCs to reduce costs but shifts jobs to other countries.

Accepted Answer

A) True 
 B)False

Question 3

A balance-of-trade deficit indicates an excess of imports over exports.

Accepted Answer

A) True 
 B)False

Question 4

An American tourist visiting Germany and spending money there (for lodging, food, etc.) will reduce the U.S. current account deficit and reduce Germany's current account balance.

Accepted Answer

A) True 
 B)False

Question 5

The United States typically has a balance-of-trade surplus in its trade with ____.

Accepted Answer

A)  China
B)  Japan
C)  A and B
D)  none of the aboveE) None of the above
F) All of the above

Question 6

____ purchases more U.S. exports than the other countries listed here.

Accepted Answer

A)  Italy​
B)  Spain
C)  Mexico
D)  CanadaE) None of the above
F) All of the above

Question 7

Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) between countries that do not affect the transfer of control.

Accepted Answer

A) True 
 B)False

Question 8

The direct foreign investment positions by U.S. firms have generally ____ over time. Restrictions by governments on direct foreign investment have generally ___ over time.

Accepted Answer

A)  increased; increased
B)  increased; decreased
C)  decreased; decreased
D)  decreased; increasedE) A) and D)
F) A) and C)

Question 9

The ____ is the difference between exports and imports.

Accepted Answer

A)  balance of trade
B)  balance on goods and services
C)  balance of payments
D)  current account
E)  capital accountF) C) and E)
G) A) and D)

Question 10

As a result of the European Union, restrictions on exports between ____ were reduced or eliminated.

Accepted Answer

A)  member countries and the United States
B)  member countries
C)  member countries and European nonmembers
D)  none of the aboveE) None of the above
F) C) and D)

Question 11

The International Finance Corporation was established to promote economic development:

Accepted Answer

A)  in Asia through grants to businesses.
B)  by providing nonsubsidized loans (at market interest rates)  to governments and their agencies.
C)  by providing low-interest-rate loans (below-market rates)  to poor nations.
D)  through the private sector by providing loans to corporations and investing in their stock.E) A) and D)
F) A) and B)

Question 12

A weakening of the U.S. dollar with respect to the British pound would likely reduce U.S. exports to the United Kingdom and increase U.S. imports from the United Kingdom.

Accepted Answer

A) True 
 B)False

Question 13

The World Bank extends loans only to developed nations, while the International Development Association (IDA) extends loans only to developing nations.

Accepted Answer

A) True 
 B)False

Question 14

The capital account reflects changes in country ownership of direct foreign investment.

Accepted Answer

A) True 
 B)False

Question 15

The World Trade Organization was established to provide a forum for multilateral trade negotiations and to settle trade disputes.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a key component that determines a country's primary income (within the country's current account) ?

Accepted Answer

A)  direct foreign investment
B)  international trade
C)  tax rates
D)  giFtsE) A) and B)
F) A) and C)

Question 17

Direct foreign investment by U.S.-based MNCs occurs primarily in the Bahamas and Brazil.

Accepted Answer

A) True 
 B)False

Question 18

Assume that some U.S. firms will purchase supplies from either China or from U.S. firms. If the Chinese yuan appreciates against the dollar, that should reduce the U.S. balance-of-trade deficit with China.

Accepted Answer

A) True 
 B)False

Question 19

The J-curve effect is the initial worsening of the U.S. trade balance due to a weakening dollar because of established trade relationships that are not easily changed; as the dollar weakens, the dollar value of imports initially rises before the U.S. trade balance is improved.

Accepted Answer

A) True 
 B)False

Question 20

A tariff is a maximum limit on imports.

Accepted Answer

A) True 
 B)False

Exam 2: International Flow of Funds

A tariff is a maximum limit on imports.

Correct AnswerverifiedShow Answer

The World Bank extends loans only to developed nations, while the International Development Association (IDA) extends loans only to developing nations.

Correct AnswerverifiedShow Answer

Which of the following is a key component that determines a country's primary income (within the country's current account) ?

Correct AnswerverifiedShow Answer

The United States typically has a balance-of-trade surplus in its trade with ____.

Correct AnswerverifiedShow Answer

An American tourist visiting Germany and spending money there (for lodging, food, etc.) will reduce the U.S. current account deficit and reduce Germany's current account balance.

Correct AnswerverifiedShow Answer

Assume that some U.S. firms will purchase supplies from either China or from U.S. firms. If the Chinese yuan appreciates against the dollar, that should reduce the U.S. balance-of-trade deficit with China.

Correct AnswerverifiedShow Answer

The ____ is the difference between exports and imports.

Correct AnswerverifiedShow Answer

A weakening of the U.S. dollar with respect to the British pound would likely reduce U.S. exports to the United Kingdom and increase U.S. imports from the United Kingdom.

Correct AnswerverifiedShow Answer

A balance-of-trade deficit indicates an excess of imports over exports.

Correct AnswerverifiedShow Answer

____ purchases more U.S. exports than the other countries listed here.

Correct AnswerverifiedShow Answer

The capital account reflects changes in country ownership of direct foreign investment.

Correct AnswerverifiedShow Answer

The International Finance Corporation was established to promote economic development:

Correct AnswerverifiedShow Answer

The direct foreign investment positions by U.S. firms have generally ____ over time. Restrictions by governments on direct foreign investment have generally ___ over time.

Correct AnswerverifiedShow Answer

Direct foreign investment by U.S.-based MNCs occurs primarily in the Bahamas and Brazil.

Correct AnswerverifiedShow Answer

The World Trade Organization was established to provide a forum for multilateral trade negotiations and to settle trade disputes.

Correct AnswerverifiedShow Answer

Outsourcing allows some MNCs to reduce costs but shifts jobs to other countries.

Correct AnswerverifiedShow Answer

The World Bank frequently enters into cofinancing agreements, under which it joins with official aid agencies, export credit agencies, or commercial banks in providing financing.

Correct AnswerverifiedShow Answer

The J-curve effect is the initial worsening of the U.S. trade balance due to a weakening dollar because of established trade relationships that are not easily changed; as the dollar weakens, the dollar value of imports initially rises before the U.S. trade balance is improved.

Correct AnswerverifiedShow Answer

As a result of the European Union, restrictions on exports between ____ were reduced or eliminated.

Correct AnswerverifiedShow Answer

Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) between countries that do not affect the transfer of control.

Correct AnswerverifiedShow Answer

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The direct foreign investment positions by U.S. firms have generally __ over time. Restrictions by governments on direct foreign investment have generally _ over time.

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