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1.

Anincreaseinanation'sfinancialliabilitiestoforeignresidentsisa:

A.

reserveinflow.

B.

reserveoutflow.

C.

capitalimports.

D.

capitalexports.

2.

Whichofthefollowingisconsideredacapitalinflow?

A.

AsaleofU.S.financialassetstoaforeignbuyer

B.

AloanfromaU.S.banktoaforeignborrower

C.

ApurchaseofforeignfinancialassetsbyaU.S.buyer

D.

AU.S.citizen'srepaymentofaloanfromaforeignbank

3.

Inacountry'sbalanceofpayments,whichofthefollowingitemswillberecordedasadebitentry?

A.

Domesticbankbalancesownedbyforeignersarereduced

B.

Foreignbankbalancesownedbydomesticresidentsarereduced

C.

Assetsownedbydomesticresidentsaresoldtononresidents

D.

Securitiesaresoldbydomesticresidentstononresidents

4.

WhenaU.S.residentincreasesherholdingsofaforeignfinancialasset,thisitemisrecordedasa:

A.

creditentryintheU.S.currentaccount.

B.

debitentryintheU.S.currentaccount.

C.

creditentryintheU.S.capitalaccount.

D.

debitentryintheU.S.capitalaccount.

5.

WhichofthefollowingwouldtendtocontributetoaU.S.currentaccountsurplus?

A.

TheUnitedStatesmakesaunilateraltariffreductiononimportedgoods.

B.

TheUnitedStatescutsbackonAmericanmilitarypersonnelstationedinJapan.

C.

U.S.touriststravelinlargenumberstoAsia.

D.

RussianvodkabecomesincreasinglypopularintheUnitedStates.

6.

Acountryexperiencingacurrentaccountsurplus:

A.

needstoborrowinternationally.

B.

isabletolendinternationally.

C.

mustalsohavehadasurplusinitsoverallpaymentsbalance.

D.

spendsmorethanitearnsonitsmerchandiseandservicetrade,internationalincomepaymentsandreceiptsandinternationaltransfers.

7..

Anationisconsideredtobea<n>_____intheinternationalmarket,ifitscurrentaccountisindeficit.

A.

importer

B.

exporter

C.

borrower

D.

lender

8.

Anationiscalledalenderif:

A.

itsfinancialaccountisindeficitduringatimeperiod.

B.

itscurrentaccountisinsurplusduringatimeperiod.

C.

itscurrentaccountisindeficitduringatimeperiod.

D.

itsnetstockofforeignassetsispositive.

9.

Anationiscalledacreditorif:

A.

itprovidedfinancialassetstoothercountries.

B.

itsnetstockofforeignassetsispositive.

C.

itscurrentaccountisinsurplusduringatimeperiod.

D.

itscurrentaccountisindeficitduringatimeperiod.

10.

Theinternationalinvestmentpositionofacountryshows:

A.

itsstocksofinternationalassetsduringatimeperiod.

B.

itsstocksofinternationalliabilitiesduringatimeperiod.

C.

itsstocksofinternationalassetsandliabilitiesatapointintime.

D.

whetheritscurrentaccountisindeficitorsurplusatapointintime.

11.

IfthepriceofBritishpoundsintermsoftheU.S.dollarsis$1.80perpound,thenthepriceofU.S.dollarsintermsofBritishpoundsis:

A.

≤1.80perdollar.

B.

≤0.555perdollar.

C.

≤0.90perdollar.

D.

≤3.60perdollar.

12.

RapidincreasesintheU.S.exportsofgoodsandserviceswillresultina<n>_____foreigncurrencyanda<n>_____theU.S.dollarsintheforeignexchangemarket.

A.

increaseinthedemandfor;increaseinthesupplyof

B.

increaseinthesupplyof;increaseinthedemandfor

C.

shortageof;surplusof

D.

decreaseinthesupplyof;decreaseinthedemandfor

13.

AnincreaseintheU.S.importsofgoodsandservicesfromtheEUcountrieswillresultina<n>_____euroanda<n>_____theU.S.dollarsintheforeignexchangemarket.

A.

increaseinthesupplyof;increaseinthedemandfor

B.

decreaseinthedemandfor;decreaseinthesupplyof

C.

surplusof;shortageof

D.

increaseinthedemandfor;increaseinthesupplyof

14.

AssumeyouareaChineseexporterandexpecttoreceive$250,000attheendof60days.Youcanremovetheriskoflossduetoadevaluationofthedollarby:

A.

sellingdollarsinthe60-dayforwardexchangemarket.

B.

buyingdollarsnowandsellingthesedollarsattheendof60days.

C.

sellingtheyuanequivalentintheforwardexchangemarketfor60-daydelivery.

D.

keepingthedollarsintheUnitedStatesaftertheyaredeliveredtoyou.

15.

AssumeyouareanAmericanimporterwhomustpay500,000Eurosattheendof90dayswhenyoureceive1,000casesofFrenchwineatyourwarehouseinNewYork.Supposethatyouhavenotcoveredthistransactionintheforwardmarket,inwhichofthefollowingcaseswillyousufferthelargestloss?

A.

Theeurospotexchangeratevaluevis-à-visthedollardoesnotchange

B.

Theeuro<spot>initiallyappreciatesby2percent,andthendepreciatesby1percent

C.

Theeuro<spot>initiallydepreciatesby3percent,andthenappreciatesby2percent

D.

Theeuro<spot>initiallyappreciatesby3percent,andthendepreciatesby2.9percent

16.

A_____givestheholdertherightbutnottheobligationtosellaforeigncurrencyatsometimeinthefutureatapricesettoday.

A.

forwardexchangecontract

B.

currencyswap

C.

putoption

D.

calloption

17.

Whichofthefollowingfinancialinstrumentsprovidesabuyertheright<butnottheobligation>topurchaseorsellafixedamountofcurrencyataprearrangedprice,withinafewdaystoafewyears?

A.

Letterofcredit

B.

Currencyoption

C.

Currencyswap

D.

Forwardcontract

18.

Aninvestmentis_____ifitisfullyhedgedagainstexchange-raterisk.

A.

covered

B.

uncovered

C.

speculative

D.

riskneutral

19.

Foraninvestorwhostartswithdollarsandwantstoendupwithdollarsinthefuture,whichofthefollowingchoicesisanexampleofacoveredinternationalinvestment?

A.

Selldollarsatthespotrate,investtheproceedsinforeigncurrency-denominatedfinancialinstruments,andsignaforwardexchangecontracttobuytheforeigncurrency

B.

Selldollarsatthespotrate,investtheproceedsinforeigncurrency-denominatedfinancialinstruments,andsignaforwardexchangecontracttobuydollars

C.

Selldollarsatthespotrate,investtheproceedsinforeigncurrency-denominatedfinancialinstruments,andthenbuydollarsatthefuturespotrate

D.

Buyadollar-denominatedfinancialasset

20.

Foraninvestorwhostartswithdollarsandwantstoendupwithdollarsinthefuture,whichofthefollowingchoicesisanexampleofanuncoveredinternationalinvestment?

A.

Selldollarsatthespotrate,investtheproceedsinforeigncurrency-denominatedfinancialinstruments,andsignaforwardexchangecontracttobuytheforeigncurrency

B.

Selldollarsatthespotrate,investtheproceedsinforeigncurrency-denominatedfinancialinstruments,andsignaforwardexchangecontracttobuydollars

C.

Selldollarsatthespotrate,investtheproceedsinforeigncurrency-denominatedfinancialinstruments,andthenbuydollarsatthefuturespotrate

D.

Buyadollar-denominatedfinancialass