International Financial Management 8th Edition by Cheol Eun – Test Bank

 

 

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Sample Test

International Financial Management, 8e (Eun)

Chapter 3   Balance of Payments

 

1) Over half of all dollar bills in circulation are held outside American’s borders.

 

Answer:  TRUE

Topic:  Balance of Payments Trends in Major Countries

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2) The current account balance, which is the difference between a country’s exports and imports, is a component of the country’s GNP. Other components of GNP include

1.    A) consumption and investment and government expenditure.

2.    B) consumption and government expenditure and net exports.

3.    C) consumption and net exports and government expenditure.

4.    D) consumption less imports.

 

Answer:  A

Topic:  Balance of Payments Accounting

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3) If the United States imports more than it exports, then this means that

1.    A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.

2.    B) the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus.

3.    C) the U.S. dollar would be under pressure to appreciate against other currencies.

4.    D) the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus, and the U.S. dollar would be under pressure to appreciate against other currencies.

 

Answer:  A

Topic:  Balance of Payments Accounting

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4) Balance of payments

1.    A) is defined as the statistical record of a country’s international transactions over a certain period of time presented in the form of a double-entry bookkeeping.

2.    B) provides detailed information concerning the demand and supply of a country’s currency.

3.    C) can be used to evaluate the performance of a country in international economic competition.

4.    D) all of the options

 

Answer:  D

Topic:  Balance of Payments Accounting

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5) If a country is grappling with a major balance-of-payment difficulty, it may not be able to expand imports from the outside world. Instead, the country may be tempted to

1.    A) impose measures to restrict imports.

2.    B) impose measures to discourage capital outflows.

3.    C) impose measures to restrict imports and discourage capital outflows.

4.    D) none of the options

 

Answer:  C

Topic:  Balance of Payments Accounting

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6) If the United States imports more than it exports, then

1.    A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.

2.    B) one can infer that the U.S. dollar would be under pressure to depreciate against other currencies.

3.    C) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus, and one can infer that the U.S. dollar would be under pressure to depreciate against other currencies.

4.    D) none of the options

 

Answer:  C

Topic:  Balance of Payments Accounting

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7) Generally speaking, any transaction that results in a receipt from foreigners

1.    A) will be recorded as a debit, with a negative sign, in the U.S. balance of payments.

2.    B) will be recorded as a debit, with a positive sign, in the U.S. balance of payments.

3.    C) will be recorded as a credit, with a negative sign, in the U.S. balance of payments.

4.    D) will be recorded as a credit, with a positive sign, in the U.S. balance of payments.

 

Answer:  D

Topic:  Balance of Payments Accounting

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8) Generally speaking, any transaction that results in a payment to foreigners

1.    A) will be recorded as a debit, with a negative sign, in the U.S. balance of payments.

2.    B) will be recorded as a debit, with a positive sign, in the U.S. balance of payments.

3.    C) will be recorded as a credit, with a negative sign, in the U.S. balance of payments.

4.    D) will be recorded as a credit, with a positive sign, in the U.S. balance of payments.

 

Answer:  A

Topic:  Balance of Payments Accounting

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9) If Japan exports more than it imports, then

1.    A) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.

2.    B) one can infer that the yen would be likely to appreciate against other currencies.

3.    C) the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus, and one can infer that the yen would be likely to appreciate against other currencies.

4.    D) none of the options

 

Answer:  B

Topic:  Balance of Payments Accounting

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10) The balance of payments records

1.    A) only international trade, (exports and imports).

2.    B) only cross-border investments (FDI and portfolio investment).

3.    C) not only international trade, (exports and imports) but also cross-border investments.

4.    D) none of the options

 

Answer:  C

Topic:  Balance of Payments Accounting

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11) Credit entries in the U.S. balance of payments

1.    A) result from foreign sales of U.S. goods and services, goodwill, financial claims, and real assets.

2.    B) result from U.S. purchases of foreign goods and services, goodwill, financial claims, and real assets.

3.    C) give rise to the demand for dollars.

4.    D) give rise to the supply of dollars.

5.    E) result from foreign sales of U.S. goods and services, goodwill, financial claims, and real assets, and give rise to the demand for dollars.

 

Answer:  E

Topic:  Balance of Payments Accounting

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12) A country experiencing a significant balance-of-payments surplus would be likely to

1.    A) expand imports, offering marketing opportunities for foreign enterprises.

2.    B) refrain from imposing foreign exchange restrictions.

3.    C) expand exports, offering international marketing opportunities for domestic enterprises.

4.    D) expand imports, offering marketing opportunities for foreign enterprises, and refrain from imposing foreign exchange restrictions.

 

Answer:  D

Topic:  Balance of Payments Accounting

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13) Suppose the McDonalds Corporation imports Canadian beef, paying for it by transferring the funds to a New York bank account kept by the Canadian beef producer.

1.    A) Payment by McDonalds will be recorded as a debit.

2.    B) The deposit of the funds by the seller will be recorded as a debit.

3.    C) Payment by McDonalds will be recorded as a credit.

4.    D) The deposit of the funds by the buyer will be credit.

 

Answer:  A

Topic:  Balance of Payments Accounting

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14) Since the balance of payments is presented as a system of double-entry bookkeeping,

1.    A) every credit in the account is balanced by a matching debit.

2.    B) every debit in the account is balanced by a matching credit.

3.    C) every credit in the account is balanced by a matching debit and every debit in the account is balanced by a matching credit.

4.    D) none of the options

 

Answer:  C

Topic:  Balance of Payments Accounting

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15) Suppose the InBev Corporation (a non-U.S. MNC) buys the Anheuser-Busch Corporation, paying the U.S. shareholders cash.

1.    A) Payment by InBev will be recorded as a debit.

2.    B) The deposit of the funds by the sellers will be recorded as a debit.

3.    C) Payment by InBev will be recorded as a credit.

4.    D) The deposit of the funds by the buyer will be credit.

 

Answer:  C

Topic:  Balance of Payments Accounts

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16) The current account includes

1.    A) the export and import of goods and services.

2.    B) all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses.

3.    C) all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights (SDRs).

4.    D) none of the options

 

Answer:  A

Topic:  Balance of Payments Accounts

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17) A country with a current account surplus

1.    A) acquires IOUs from foreigners, thereby increasing its net foreign wealth.

2.    B) must borrow from foreigners or draw down on its previously accumulated foreign wealth.

3.    C) will experience a reduction in the country’s net foreign wealth.

4.    D) must borrow from foreigners or draw down on its previously accumulated foreign wealth and will experience a reduction in the country’s net foreign wealth.

 

Answer:  A

Topic:  Balance of Payments Accounts

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18) The capital account includes

1.    A) the export and import of goods and services.

2.    B) all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses.

3.    C) all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights (SDRs).

4.    D) none of the options

 

Answer:  B

Topic:  Balance of Payments Accounts

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19) The official reserve account includes

1.    A) the export and import of goods and services.

2.    B) all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses.

3.    C) all purchases and sales of international reserve assets such as dollars, foreign exchanges, gold, and special drawing rights (SDRs).

4.    D) none of the options

 

Answer:  C

Topic:  Balance of Payments Accounts

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20) A country’s international transactions can be grouped into the following three main types:

1.    A) current account, medium term account, and long term capital account.

2.    B) current account, long term capital account, and official reserve account.

3.    C) current account, capital account, and official reserve account.

4.    D) capital account, official reserve account, trade account.

 

Answer:  C

Topic:  Balance of Payments Accounts

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21) Invisible trade refers to

1.    A) services that avoid tax payments.

2.    B) the underground economy.

3.    C) legal, consulting, and engineering services.

4.    D) tourist expenditures only.

 

Answer:  C

Topic:  Balance of Payments Accounts

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22) A country that gives foreign aid to another country can be viewed as

1.    A) importing goodwill from the latter.

2.    B) exporting goodwill to the latter.

 

Answer:  A

Topic:  Balance of Payments Accounts

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23) In 2012, the United States had a current account deficit. The current account deficit implies that the United States

1.    A) had a surplus on legal consulting and engineering services.

2.    B) produced more output than it consumed.

3.    C) consumed more output than it produced.

4.    D) none of the options

 

Answer:  C

Topic:  The Current Account

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24) The current account is divided into four finer categories:

1.    A) merchandise trade, services, factor income, and statistical discrepancy.

2.    B) merchandise trade, services, factor income, and unilateral transfers.

3.    C) merchandise trade, services, portfolio investment, and unilateral transfers.

4.    D) merchandise trade, services, factor income, and direct investment.

 

Answer:  B

Topic:  The Current Account

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25) The factors of production are

1.    A) land, labor, capital, and entrepreneurial ability.

2.    B) interest, wages and dividends.

3.    C) payments and receipts of interest, dividends, and other income on foreign investments that were previously made.

4.    D) none of the options

 

Answer:  A

Topic:  The Current Account

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26) Factor income

1.    A) consists largely of interest, dividends, and other income on foreign investments.

2.    B) is a theoretical construct of the factors of production, land, labor, capital, and entrepreneurial ability.

3.    C) is generally a very minor part of national income accounting, smaller than the statistical discrepancy.

4.    D) none of the options

 

Answer:  A

Topic:  The Current Account

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27) The entries in the “current account” and the “capital account”, combined, can be outlined (in alphabetic order) as:

 

(i) direct investment

(ii) factor income

(iii) merchandise

(iv) official transfer

(v) other capital

(vi) portfolio investment

(vii) private transfer

(viii) services

 

Current account includes

1.    A) (i), (ii), and (iii)

2.    B) (ii), (iii), and (vii)

3.    C) (iv), (v), and (vii)

4.    D) (i), (v), and (vi)

 

Answer:  B

Topic:  The Current Account

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28) The entries in the “current account” and the “capital account”, combined, can be outlined (in alphabetic order) as:

 

(i) direct investment

(ii) factor income

(iii) merchandise

(iv) official transfer

(v) other capital

(vi) portfolio investment

(vii) private transfer

(viii) services

 

Capital account includes

1.    A) (i), (ii), and (iii)

2.    B) (ii), (iii), and (vii)

3.    C) (iv), (v), and (vii)

4.    D) (i), (v), and (vi)

 

Answer:  D

Topic:  The Current Account

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29) The “J-curve effect” shows

1.    A) the initial deterioration and the eventual improvement of a country’s trade balance following a currency depreciation.

2.    B) the initial improvement and the eventual depreciation of a country’s trade balance following a currency depreciation.

3.    C) the trade balance’s lack of responsiveness to the exchanges rate changes.

4.    D) none of the options

 

Answer:  A

Topic:  The Current Account

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30) The “J-curve effect”

1.    A) happens most of the time, in the short run.

2.    B) only occurs in about 40 percent of cases, according to a study by Sebastian Edwards.

3.    C) is a long-run phenomenon, not a short-run one.

4.    D) none of the options

 

Answer:  B

Topic:  The Current Account

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31) The J-curve effect received wide attention when

1967.       A) the British trade balance worsened after a strengthening of the pound in 1967.

1968.       B) the British trade balance worsened after a devaluation of the pound in 1967.

1969.       C) the British trade balance improved after a devaluation of the pound in 1967.

1970.       D) none of the options

 

Answer:  B

Topic:  The Current Account

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32) A currency depreciation will begin to improve the trade balance immediately

1.    A) if the demand for imports and exports are inelastic.

2.    B) if the demand for imports and exports are elastic.

3.    C) if imports decrease and exports decrease.

4.    D) none of the options

 

Answer:  B

Topic:  The Current Account

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33) When a country’s currency depreciates against the currencies of major trading partners,

1.    A) the country’s exports tend to rise and imports fall.

2.    B) the country’s exports tend to fall and imports rise.

3.    C) the country’s exports tend to rise and imports rise.

4.    D) the country’s exports tend to fall and imports fall.

 

Answer:  A

Topic:  The Current Account

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34) A depreciation will begin to improve the trade balance immediately if

1.    A) imports and exports are responsive to the exchange rate changes.

2.    B) imports and exports are inelastic to the exchange rate changes.

3.    C) consumers exhibit brand loyalty and price inelasticity.

4.    D) imports and exports are inelastic to the exchange rate changes and consumers exhibit brand loyalty and price inelasticity.

 

Answer:  A

Topic:  The Current Account

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35) In the short run a currency depreciation can make a trade balance worse if

1.    A) there is no domestic producer of an import.

2.    B) there is no domestic buyer for an import.

3.    C) there is no export market for a country’s output.

4.    D) none of the options

 

Answer:  A

Topic:  The Current Account

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36) What is the correct label for the vertical axis in the J-curve?

 

1.    A) Time

2.    B) Change in the Trade Balance

3.    C) Size of Trade Balance

4.    D) Size of Merchandise Trade Balance

 

Answer:  B

Topic:  The Current Account

 

37) In the long run, both exports and imports tend to be

1.    A) unresponsive to changes in exchange rates.

2.    B) responsive to changes in exchange rates.

3.    C) both responsive and unresponsive to changes in exchange rates.

4.    D) none of the options

 

Answer:  B

Topic:  The Current Account

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38) With regard to the capital account,

1.    A) the capital account balance measures the difference between U.S. sales of assets to foreigners and U.S. purchases of foreign assets.

2.    B) U.S. sales (or exports) of assets are recorded as credits, as they result in capital inflow.

3.    C) U.S. purchases (imports) of foreign assets are recorded as debits, as they lead to capital outflow.

4.    D) all of the options

 

Answer:  D

Topic:  The Capital Account

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39) The difference between Foreign Direct Investment and Portfolio Investment is that

1.    A) Portfolio Investment mostly represents the sale and purchase of foreign financial assets such as stocks and bonds that do not involve a transfer of control.

2.    B) Foreign Direct Investment mostly represents the sale and purchase of foreign financial assets such as stocks whereas Portfolio Investment mostly involves the sales and purchase of foreign bonds.

3.    C) Foreign Direct Investment is about buying land and building factories, whereas portfolio investment is about buying stocks and bonds.

4.    D) all of the options

 

Answer:  A

Topic:  The Capital Account

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40) In the latter half of the 1980s, with a strong yen, Japanese firms

1.    A) faced difficulty exporting.

2.    B) could better afford to acquire U.S. assets that had become less expensive in terms of yen.

3.    C) financed a sharp increase in Japanese FDI in the United States.

4.    D) all of the options

 

Answer:  D

Topic:  The Capital Account

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41) International portfolio investments have boomed in recent years, as a result of

1.    A) a depreciating U.S. dollar.

2.    B) increased gasoline and other commodity prices.

3.    C) the general relaxation of capital controls and regulation in many countries.

4.    D) none of the options

 

Answer:  C

Topic:  The Capital Account

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42) If the interest rate rises in the U.S. while other variables remain constant

1.    A) capital inflows into the U.S. will increase.

2.    B) capital inflows into the U.S. may not materialize.

3.    C) capital will flow out of the U.S.

4.    D) none of the options

 

Answer:  A

Topic:  The Capital Account

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43) If for a particular county an increase in the interest rate is more or less matched by an expected depreciation in the local currency,

1.    A) traders will probably be tempted to find another country to invest in.

2.    B) the interest rate increase per se will not be enough to spark capital flow into the country.

3.    C) traders will probably be tempted to find another country to invest in and the interest rate increase per se will not be enough to spark capital flow into the country.

4.    D) capital will glow out of the country as the disgruntled citizens riot and go to war with the neighbors.

 

Answer:  C

Topic:  The Capital Account

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44) The capital account measures

1.    A) the sum of U.S. sales of assets to foreigners and U.S. purchases of foreign assets.

2.    B) the difference between U.S. sales of assets to foreigners and U.S. purchases of foreign assets.

3.    C) the difference between U.S. sales of manufactured goods to foreigners and U.S. purchases of foreign products.

4.    D) none of the options

 

Answer:  B

Topic:  The Capital Account

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45) When Honda, a Japanese auto maker, built a factory in Ohio,

1.    A) it was engaged in foreign direct investment.

2.    B) it was engaged in portfolio investment.

3.    C) it was engaged in a cross-border acquisition.

4.    D) none of the options.

 

Answer:  A

Topic:  The Capital Account

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46) Government controlled investment funds, known as sovereign wealth funds,

1.    A) are playing a less-important role in international finance following the end of the fixed exchange rate era.

2.    B) are mostly domiciled in Asian and Middle Eastern countries.

3.    C) are usually responsible for converting trade surpluses and oil revenues into foreign exchange reserves.

4.    D) none of the options

 

Answer:  B

Topic:  The Capital Account

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47) Foreign direct investment (FDI) occurs

1.    A) when an investor acquires a measure of control of a foreign business.

2.    B) when there is an acquisition, by a foreign entity in the U.S., of 10 percent or more of the voting shares of a business.

3.    C) with sales and purchases of foreign stocks and bonds that do not involve a transfer of control.

4.    D) when an investor acquires a measure of control of a foreign business and when there is an acquisition, by a foreign entity in the U.S., of 10 percent or more of the voting shares of a business.

 

Answer:  D

Topic:  The Capital Account

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48) The capital account may be divided into three categories—

1.    A) cross-border mergers and acquisitions, portfolio investment, and other investment.

2.    B) direct investment, portfolio investment, and cross-border mergers and acquisitions.

3.    C) direct investment, mergers and acquisitions, and other investment.

4.    D) direct investment, portfolio investment, and other investment.

 

Answer:  D

Topic:  The Capital Account

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49) When Nestlé, a Swiss firm, bought the American firm Carnation, it was engaged in foreign direct investment. If Nestlé had only bought a non-controlling number of shares of the firm,

1.    A) Nestlé would have been engaged in portfolio investment.

2.    B) Nestlé would have been engaged in a cross-border acquisition.

3.    C) it would depend if they bought the shares from an American or a Canadian.

4.    D) none of the options

 

Answer:  A

Topic:  The Capital Account

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50) Transactions in currency, bank deposits and so forth

1.    A) tend to be insensitive to both changes in relative interest rates and the anticipated change in exchange rate.

2.    B) tend to be sensitive to both changes in relative interest rates and the anticipated change in exchange rate.

3.    C) tend to be sensitive to changes in relative interest rates but insensitive to the anticipated change in exchange rate.

4.    D) tend to be insensitive to changes in relative interest rates but sensitive to the anticipated change in exchange rate.

 

Answer:  B

Topic:  The Capital Account

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51) Since security returns tend to have low correlations among countries,

1.    A) investors can reduce risk more effectively if they diversify their portfolio holdings internationally rather than purely domestically.

2.    B) investors who have a domestically diversified portfolio, with exposures across industry types will not gain much from diversifying abroad.

3.    C) investors who diversify internationally will likely underperform investors who keep all their investments in one country.

4.    D) none of the options

 

Answer:  A

Topic:  The Capital Account

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52) The world’s largest debtor nation and creditor nation, respectively, are

1.    A) Japan and the U.S.

2.    B) The U.S. and Japan.

3.    C) The U.S. and Canada.

4.    D) Great Britain and Mexico.

 

Answer:  B

Topic:  The Capital Account

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53) Statistical discrepancy, which, by definition, represents errors and omissions,

1.    A) cannot be calculated directly.

2.    B) is calculated by taking into account the balance-of-payments identity.

3.    C) probably has some elements that are honest mistakes, it can’t all be money laundering and drugs.

4.    D) all of the options

 

Answer:  D

Topic:  Statistical Discrepancy

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54) The statistical discrepancy in the balance-of-payments accounts

1.    A) arise since recordings of payments and receipts are done at different times, in different places, possibly using different methods.

2.    B) arise because some transactions (illegal transactions) occur “off the books.”

3.    C) represents omitted and misreported transactions.

4.    D) all of the options

 

Answer:  D

Topic:  Statistical Discrepancy

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55) Which of the following is most indicative of the pressure that a country’s currency faces for depreciation or appreciation?

1.    A) The current account

2.    B) The capital account

3.    C) The statistical discrepancies

4.    D) The official settlement balance

 

Answer:  D

Topic:  Statistical Discrepancy

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56) The United States is considered

1.    A) a net creditor nation.

2.    B) a net debtor nation.

 

Answer:  B

Topic:  Statistical Discrepancy

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57) Regarding the statistical discrepancy in the balance-of-payments accounts,

1.    A) there is some evidence that financial transactions may be mainly responsible for the discrepancy.

2.    B) the sum of the balance on the capital account and the statistical discrepancy is very close to the balance of the current account in magnitude.

3.    C) it tends to be positive one year and negative in others, so it’s safe to ignore it.

4.    D) there is some evidence that financial transactions may be mainly responsible for the discrepancy, and the sum of the balance on the capital account and the statistical discrepancy is very close to the balance of the current account in magnitude.

 

Answer:  D

Topic:  Statistical Discrepancy

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58) The central bank of the United States is

1.    A) the New York Fed.

2.    B) the Federal Reserve System.

3.    C) the EXIM bank.

4.    D) none of the options—the U.S. does not have a central bank.

 

Answer:  B

Topic:  Official Reserve Account

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59) When a country must make a net payment to foreigners because of a balance-of-payments deficit, the central bank of the country

1.    A) should do nothing.

2.    B) should run down its official reserve assets (e.g., gold, foreign exchanges, and SDRs).

3.    C) should borrow anew from foreign central banks.

4.    D) should either run down its official reserve assets (e.g., gold, foreign exchanges, and SDRs) or borrow anew from foreign central banks.

 

Answer:  D

Topic:  Official Reserve Account

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60) Continued U.S. trade deficits coupled with foreigners’ desire to diversify their currency holdings away from U.S. dollars

1.    A) could further diminish the position of the dollar as the dominant reserve currency.

2.    B) could affect the value of U.S. dollar (e.g., through the currency diversification decisions of Asian central banks).

3.    C) could lend steam to the emergence of the euro as a credible reserve currency.

4.    D) all of the options

 

Answer:  D

Topic:  Official Reserve Account

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61) Currently, international reserve assets are comprised of

1.    A) gold, platinum, foreign exchanges, and special drawing rights (SDRs).

2.    B) gold, foreign exchanges, special drawing rights (SDRs), and reserve positions in the International Monetary Fund (IMF).

3.    C) gold, diamonds, foreign exchanges, and special drawing rights (SDRs).

4.    D) reserve positions in the International Monetary Fund (IMF), only.

 

Answer:  B

Topic:  Official Reserve Account

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62) International reserve assets include “foreign exchanges”. These are

1.    A) Special Drawing Rights (SDRs) at the IMF.

2.    B) reserve positions in the International Monetary Fund (IMF).

3.    C) foreign currency held by a country’s central bank.

4.    D) none of the options

 

Answer:  C

Topic:  Official Reserve Account

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63) The most important international reserve asset, comprising 94 percent of the total reserve assets held by IMF member countries is

1.    A) gold.

2.    B) foreign exchanges.

3.    C) special Drawing Rights (SDRs).

4.    D) reserve positions in the International Monetary Fund (IMF).

 

Answer:  B

Topic:  Official Reserve Account

Accessibility:  Keyboard Navigation

 

64) The “one word that haunts the dollar” is

1.    A) (Central bank) diversification.

2.    B) Reunification (Korean).

3.    C) Euro.

4.    D) (Current account) deficit.

 

Answer:  A

Topic:  Official Reserve Account

Accessibility:  Keyboard Navigation

 

65) The vast majority of the foreign-exchange reserves held by central banks are denominated in

1.    A) local currencies.

2.    B) U.S. dollars.

3.    C) Yen.

4.    D) Euro.

 

Answer:  B

Topic:  Official Reserve Account

Accessibility:  Keyboard Navigation

 

 

66) Among IMF member countries, the dollar’s dominant position in the world’s reserve holdings may decline to a certain extent as the euro becomes a “known quantity” and its external value becomes more stable. In fact, the euro’s share has increased

19.  A) from zero percent in 1999 to 19.9 percent in 2015.

20.  B) from 17.9 percent in 1999 to 19.9 percent in 2015.

21.  C) from 17.9 percent in 1999 to 52.8 percent in 2015.

22.  D) none of the options

 

Answer:  B

Topic:  Official Reserve Account

Accessibility:  Keyboard Navigation

 

67) Which of the following would not count as a foreign-exchange reserve held by a central bank?

1.    A) The local currency

2.    B) U.S. dollars

3.    C) SDRs

4.    D) Euro

 

Answer:  A

Topic:  Official Reserve Account

Accessibility:  Keyboard Navigation

 

68) The balance of payments identity is given by BCA + BKA + BRA = 0. Rearrange the identity for a country with a pure flexible exchange rate regime.

1.    A) BCA + BKA + BRA = 0

2.    B) BCA = −BKA

3.    C) BCA + BKA = −BRA

4.    D) BRA = −BCA

 

Answer:  B

Topic:  The Balance of Payments Identity