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1InternationalFinanceAssignmentProblems(2)Name:StudentNo.:I.Choosethecorrectanswerforthefollowingquestions(onlyONEcorrectanswer)(5creditsforeachquestion,totalcredits4x15=60)1.Accordingtotheprincipleofthebalancedbalanceofpayments,ifacountryreducesitsforeignexchangereservesby$20millionandthestatisticaldiscrepancyisinthecreditentryof$5millioninagivenperiodoftime,thecountryruns__________ofitsbalanceofpaymentsduringthatperiodoftime.A.$15milliondeficitsB.$25milliondeficitsC.$20milliondeficitsD.$5milliondeficits2.Ifacountry’sdomesticsavingisgreaterthandomesticinvestment,thecountryprobablyhas__________.A.acurrentaccountsurplusB.anetcapitaloutflowC.acurrentaccountdeficitD.BothAandBarepossible.3.Adebitentryinthebalance-of-paymentsaccountrepresentsatransactionthat__________.A.adomesticresidentreceivesapaymentfromabroadB.adomesticresidentmakesapaymenttoaforeignresidentC.willimprovethecurrentaccountstatusD.willhavenoaffectsonthenation’sforeignexchangereserves4.Intermsofbalance-of-paymentsaccount,whichofthefollowingwouldberecordedasadebitentryintheU.S.BOP?A.exportsofmerchandiseB.exportsofservicesC.purchaseoftheU.S.Treasurybondsbynon-residentsD.anincreaseofthedepositinaU.S.resident'saccountataforeignbank5.Abalance-of-paymentsdeficitisdefinedasasituationinwhich__________.A.thevalueofpaymentsmadetotheforeignersexceedsthevalueofreceiptsreceivedfromtheforeignersinagivenperiodoftimeB.thegovernmentmustborrowinordertomeetitsbudgetobligationsC.thevalueofmanufacturedgoodexportsislessthanthevalueofimportedgoodsD.anationearnsmuchinextraassetsorreducedliabilitiesinitsdealingswiththe2restoftheworld6.WhichofthefollowingwouldNOTbeconsideredasatypicalBOPtransaction?A.ToyotaUSAisaUSdistributorofautomobilesmanufacturedinJapanbyitsparentcompany.B.AU.S.subsidiaryofEuropeanfinancialgiant,CreditSuisse,paysdividendstoitsparentinZurich.C.AUStouristpurchasesgiftsatamuseuminLondon.D.AllareexampleofBOPtransactions.7.Thebalanceofpaymentsisastatisticalrecordwhichmeasuresthetotalvalueof__________.A.acountry’sforeignexchangereservesinacertainperiodoftimeB.acountry’sforeigntradesbetweentheresidentsofacountryanditsnon-residentsforagivenperiodoftimeC.alleconomicandfinancialtransactionsbetweentheresidentsofacountryanditsnon-residentsforagivenperiodoftimeD.acountry’scapitalinflowsandoutflowsataparticulardateinagivenyear8.ABritishpensionfundsellssomeofitsholdingsofthestocksofU.S.companiesinordertobuyU.S.corporatebonds.Thistransactionwillaffect__________.A.theU.S.internationalinvestmentpositionB.theBritishinternationalinvestmentpositionC.bothcountries’internationalinvestmentpositionD.Noneoftheabove.Thisisbecausebothcountries’internationalinvestmentpositionunchanged,onlythecompositionofforeigninvestmentsinbothU.S.andU.K.changes.9.WhichofthefollowingtransactionsisincludedinChina’sbalance-of-paymentsaccount?A.AU.S.embassyinBeijingpayssalariestoitsAmericanstaffs.B.TheWorldBankfurnishestheChinesegovernmentwithaloan.C.AU.S.studentpaystuitionfeesforhis4year-studyinBeijingUniversity.D.TheChineseembassyinWashingtonbuystelecommunicationequipmentsfromaChinesecompanyinShanghai.10.IftheU.S.runscurrentaccountdeficits,wecanexpectthat__________.A.itmayactasanetdebtorintherestoftheworldB.itsdomesticsavingmaylessthanitsdomesticinvestmentC.itsdomesticproductionislessthanitsdomesticconsumptionD.alloftheabove11.Thetradedeficitmeansthat__________.A.residentsareimportingmoregoodsthantheyareexporting3B.residentsareborrowingmorefundsthantheyarelendingC.residentsarereceivingmorepaymentsthantheyaremakingD.residentsareproducingmoregoodsthantheyareconsuming12.Whichofthefollowingisanexampleofanexchangeoffinancialassets?A.theexchangeofbutterforwheatB.theexchangeofinformationtechnologyC.theexchangeofafixed-rateloanforafloating-rateloanD.theexchangeofgoldforjewelry13.Formostcountries,thesubcategorythattypicallydominatesthecurrentaccountis__________.A.unilateraltransfersB.goodstradeC.incometradeD.servicestrade14.Whencategorizinginvestmentsforthefinancialaccountcomponentofthebalanceofpaymentsthe__________isaninvestmentwheretheinvestorhasnoincentivetocontrolwhereasthe__________isaninvestmentwheretheinvestorwantstocontrolovertheassets.A.directinvestment,portfolioinvestmentB.directinvestment,indirectinvestmentC.portfolioinvestment,indirectinvestmentD.portfolioinvestment,directinvestment15.Ifacountry’smerchandiseexportsexceeditsimportsby$50million,servicestradebalanceisnet$30millionandunilateraltransfersmadeinexcessofthosereceivedby$5million,whatisthecountry’scurrentaccountbalance?A.$85millionB.$75millionC.$15millionD.$25millionII.Answerthefollowingquestions:(3creditsforeachquestion,totalcredits3x6=18)Questions1through5arebasedontheinformationoftheselecteditemsfromcountryA’sbalanceofpaymentsin2010.CountryA’sBalanceofPayments,2010(millionsofU.S.dollar)Goodsexport719Goodsimport1,1454Serviceexport279Serviceimport210Incomepayments269Incomereceipts284Netunilateraltransfers-49Errorsandomissions111.CountryA’sBOTis__________.2.CountryA’scurrentaccountbalanceis__________.3.SupposethechangesincountryA’soffi