Question 1

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

Portfolio investment is a type of investment where investors purchase long-term financial assets such as stocks and bonds, but they do not acquire any control over the company or entity issuing those assets. Therefore, portfolio investments do not affect the transfer of control between countries.

Question 2

Which of the following is not a commonly occurring subtle trade restriction

Accepted Answer

All the options describe practices that can affect international trade, but they are not subtle trade restrictions. Subtle trade restrictions typically involve non-tariff barriers like quotas, standards, or regulations that indirectly limit imports.

Question 3

The World Bank's Multilateral Investment Guarantee Agency (MIGA):

Accepted Answer

The World Bank's Multilateral Investment Guarantee Agency (MIGA) offers various forms of political risk insurance, which protects private investors against losses due to political instability, expropriation, war, and civil disturbance in developing countries.

Question 4

Also known as the "central banks' central bank," the __________ attempts to facilitate cooperation among countries with regard to international transactions and provides assistance to countries experiencing a financial crisis.

Accepted Answer

The definition given describes the role of the Bank for International Settlements (BIS), which is known as the "central banks' central bank" and aims to promote international monetary and financial stability. The other options listed - the World Bank, International Financial Corporation (IFC), World Trade Organization, and International Development Association (IDA) - have different functions and do not specifically focus on international cooperation in financial transactions or crisis assistance.

Question 5

Which is not a concern about the North American Free Trade Agreement (NAFTA)

Accepted Answer

The answer of Which is not a concern about the...

Question 6

A weak home currency may not be a perfect solution to correct a balance of trade deficit because:

Accepted Answer

A weak home currency makes imports more expensive and exports cheaper in foreign markets, which can help correct a trade deficit. However, foreign companies might lower their prices to maintain competitiveness, which can mitigate the expected benefits of a weaker home currency on the trade balance.

Question 7

The demand for U.S.exports tends to increase when:

Accepted Answer

When the currencies of foreign countries strengthen against the dollar, it makes U.S. exports relatively cheaper and more attractive to foreign buyers, increasing the demand for U.S. exports. Economic growth in foreign countries decreasing and U.S. inflation rising may have negative impacts on demand for U.S. exports.

Question 8

Changes in country ownership of long-term and short-term assets are measured in the balance of payments with the capital account.

Accepted Answer

Changes in country ownership of long-term and short-term assets are indeed measured in the balance of payments with the capital account.

Question 9

Direct foreign investment into the U.S.represents a ________.

Accepted Answer

Direct foreign investment refers to the investment made by foreign organizations, firms, or individuals into the U.S., which represents a capital inflow. This investment in the U.S. can result in job creation, technology transfer, and economic growth.

Question 10

The balance of payments is a measurement of all transactions between domestic and foreign residents over a specified period of time.

Accepted Answer

This statement is true. The balance of payments is a record of all economic transactions made between residents of one country and residents of other countries over a specified period of time, typically a year. The balance of payments includes transactions in goods, services, and financial assets, as well as gifts, grants, and other transfers between countries.

Question 11

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

Accepted Answer

The World Bank extends loans not only to developed nations but also to developing nations. The International Development Association (IDA), however, only extends loans to the poorest developing nations.

Question 12

Intracompany trade makes up approximately _____ percent of all international trade.

Accepted Answer

The answer of Intracompany trade makes up approximately _____ percent...

Question 13

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

Accepted Answer

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

Question 14

The current account represents the investment in fixed assets in foreign countries that can be used to conduct business operations.

Accepted Answer

The current account represents the balance of trade of goods and services between a country and its trading partners. It includes exports and imports, as well as income and transfer payments. Investment in fixed assets in foreign countries is recorded in the capital account.

Question 15

Like the International Monetary Fund (IMF),the _______________ is composed of a collection of nations as members.However,unlike the IMF,it uses the private rather than the government sector to achieve its objectives.

Accepted Answer

The International Financial Corporation (IFC) is a member-based organization like the IMF, but it differs in that it uses private sector investments to promote economic development in developing countries. The World Bank, IDA, and BIS are also member-based organizations, but they have different objectives and functions. The WTO is not a member-based organization, as it has participation from governments rather than membership.

Question 16

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

Accepted Answer

A weakening U.S. dollar makes U.S. goods cheaper for British buyers, likely increasing U.S. exports to Britain, while making British goods more expensive for U.S. buyers, likely reducing U.S. imports from Britain.

Question 17

A General Agreement on Tariffs and Trade (GATT)accord in 1993 called for:

Accepted Answer

The General Agreement on Tariffs and Trade (GATT) accord in 1993 aimed to lower trade restrictions around the world. It led to the creation of the World Trade Organization (WTO), which continues to negotiate and enforce trade agreements to reduce barriers to international trade.

Question 18

______________ is (are)income received by investors on foreign investments in financial assets (securities).

Accepted Answer

The answer of ______________ is (are)income received by investors on...

Question 19

The World Bank frequently enters into cofinancing agreements.Under these agreements,financing is provided by the World Bank and/or official aid agencies,export credit agencies,or commercial banks.

Accepted Answer

The statement is true that the World Bank frequently enters into cofinancing agreements where financing is provided by the World Bank and/or official aid agencies, export credit agencies, or commercial banks.

Question 20

"Dumping" is used in the text to represent the:

Accepted Answer

"Dumping" refers to the practice of exporting goods at prices lower than their cost of production, which can harm domestic producers and create trade imbalances.

Quiz 2: International Flow of Funds