The Balance Of Payments

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Question 1
Free
Multiple Choice

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

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A

the financial account

B

the accounts payable

C

the capital account

D

the current account

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Question 2
Free
Multiple Choice

Which of the following international transactions would NOT be counted as a balance of payments (BOP) transaction?

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A

An American tourist purchases cheese in Milwaukee, Wisconsin.

B

The U.S. subsidiary of a British firm pays profits (dividends) back to its parent firm in London.

C

A Canadian lumber baron purchases a U.S. corporate bond through an investment broker in Seattle.

D

All of the above are considered BOP transactions.

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Question 3
Free
Multiple Choice

The balance of payments as applied to a course in international finance may be defined as:

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A

the amount still owed by an exporting firm after making an initial down payment.

B

the amount still owed by governments to the International Monetary Fund.

C

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

D

the amount of a country's merchandise trade deficit or surplus.

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Question 4
Free
Multiple Choice

Balance of payment (BOP) data may be important for any of the following reasons:

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A

BOP data helps to forecast a country's market potential, especially in the short run.

B

The BOP is an important indicator of a country's foreign exchange rate.

C

Changes in a country's BOP may signal a change in controls over payment of dividends and interest.

D

all of the choices provided above

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Question 5
Free
Multiple Choice

A country experiencing a serious BOT ________ is more likely to ________ exports than otherwise.

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A

surplus; contract

B

surplus; expand

C

deficit; expand

D

none of the above

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Question 6
Multiple Choice

Which of the following would NOT be considered a typical BOP transaction?

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A
Toyota U.S.A. is a U.S. distributor of automobiles manufactured in Japan by its parent company.
B
The U.S. subsidiary of European financial giant, Credit Suisse, pays dividends to its parent in Zurich.
C
A U.S. tourist purchases gifts at a museum in London.
D
All are examples of BOP transactions.
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Question 7
Multiple Choice

Which of the following is NOT an item to be considered in BOP calculations?

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A
A foreign resident purchases a U.S. Treasury Bill.
B
A U.S.-based firm manages the development of an oil field in Kazakhstan.
C
A consumer buys a VCR made in Korea from a Florida Wal-Mart store.
D
A U.S. citizen living in Minnesota travels to Winnipeg, Canada, and buys a case of LaBatt's Canadian beer.
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Question 8
Multiple Choice

The balance of payments:

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A
determines the eligibility of countries for IMF aid.
B
adds up the value of all assets and liabilities of a country on a specific date.
C
records all international transactions for a country over a period of time.
D
all of the above
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Question 9
Multiple Choice

An American tourist purchases a leather jacket while in Italy. Which of the following statements is true?

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A
The leather purchase would be considered an import for the U.S. BOP.
B
This transaction would be properly accounted for in the Current Account of the U.S. BOP.
C
The leather purchase is considered an import of a good, and thus, considered part of the balance of trade as well.
D
All of these statements are true.
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Question 10
Multiple Choice

Which of the following statements about the balance of payments is NOT true?

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A
The BOP is the summary statement of all international transactions between one country and all other countries.
B
The BOP is a flow statement, summarizing all international transactions that occur across the geographic borders over a period of time, typically a year.
C
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.
D
All of the above are true.
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Question 11
True/False

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.

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True
False
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Question 12
True/False

The BOP should always balance.

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True
False
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Question 13
True/False

Changes in the BOP may predict the imposition or removal of foreign exchange controls.

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True
False
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Question 14
True/False

A country experiencing a serious trade deficit is not as likely to expand imports as it would be if running a surplus.

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True
False
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Question 15
True/False

The authors identify a tip for understanding BOP accounting. They recommend that you "follow the cash flow."

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True
False
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Question 16
True/False

The BOP must be in balance, but the current account need not be.

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True
False
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Question 17
True/False

Expenditures by U.S. tourists in foreign countries for foreign goods or services are factored into BOP calculations.

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True
False
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Question 18
True/False

Like a balance sheet, the Balance of Payments adds up the value of all assets and liabilities of a country on a specific date.

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True
False
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Question 19
True/False

Because current and financial/capital account balances use double-entry bookkeeping it is unusual to find serious discrepancies in the debits and credits.

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True
False
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Question 20
Essay

The measurement of all international economic transactions that take place between the residents of a country and foreign residents is called the balance of payments (BOP). List and explain three reasons why host-country BOP data is important to managers and investors.

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