国际金融英文版习题chapter2

1International Finance

Assignment Problems (2) Name: Student No.:

I. Choose the correct answer for the following questions (only ONE correct answer) (5 credits for each question, total credits 4 x 15 = 60)

1. According to the principle of the balanced balance of payments, if a country reduces its foreign exchange reserves by $20 million and the statistical discrepancy is in the credit entry of $5 million in a given period of time, the country runs __________ of its balance of payments during that period of time. A. $15 million deficits B. $25 million deficits C. $20 million deficits D. $5 million deficits

2. If a country’s domestic saving is greater than domestic investment, the country probably has __________.

A. a current account surplus B. a net capital outflow C. a current account deficit D. Both A and B are possible.

3. A debit entry in the balance-of-payments account represents a transaction that __________.

A. a domestic resident receives a payment from abroad

B. a domestic resident makes a payment to a foreign resident C. will improve the current account status

D. will have no affects on the nation’s foreign exchange reserves

4. In terms of balance-of-payments account, which of the following would be recorded as a debit entry in the U.S. BOP? A. exports of merchandise B. exports of services

C. purchase of the U.S. Treasury bonds by non-residents

D. an increase of the deposit in a U.S. resident's account at a foreign bank

5. A balance-of-payments deficit is defined as a situation in which __________.

A. the value of payments made to the foreigners exceeds the value of receipts received from the foreigners in a given period of time

B. the government must borrow in order to meet its budget obligations

C. the value of manufactured good exports is less than the value of imported goods

D. a nation earns much in extra assets or reduced liabilities in its dealings with the rest of the world

6. Which of the following would NOT be considered as a typical BOP transaction? A. Toyota USA is a US distributor of automobiles manufactured in Japan by its parent company.

B. A U.S. subsidiary of European financial giant, Credit Suisse, pays dividends to its parent in Zurich.

C. A US tourist purchases gifts at a museum in London. D. All are example of BOP transactions.

7. The balance of payments is a statistical record which measures the total value of __________.

A. a country’s foreign exchange reserves in a certain period of time

B. a country’s foreign trades between the residents of a country and its non-residents for a given period of time

C. all economic and financial transactions between the residents of a country and its non-residents for a given period of time

D. a country’s capital inflows and outflows at a particular date in a given year

8. A British pension fund sells some of its holdings of the stocks of U.S. companies in order to buy U.S. corporate bonds. This transaction will affect __________. A. the U.S. international investment position B. the British international investment position C. both countries’ international investment position

D. None of the above. This is because both countries’ international investment position unchanged, only the composition of foreign investments in both U.S. and U.K. changes.

9. Which of the following transactions is included in China’s balance-of-payments account?

A. A U.S. embassy in Beijing pays salaries to its American staffs. B. The World Bank furnishes the Chinese government with a loan.

C. A U.S. student pays tuition fees for his 4 year-study in Beijing University. D. The Chinese embassy in Washington buys telecommunication equipments from a Chinese company in Shanghai.

10. If the U.S. runs current account deficits, we can expect that __________. A. it may act as a net debtor in the rest of the world

B. its domestic saving may less than its domestic investment C. its domestic production is less than its domestic consumption D. all of the above

11. The trade deficit means that __________.

A. residents are importing more goods than they are exporting B. residents are borrowing more funds than they are lending

C. residents are receiving more payments than they are making D. residents are producing more goods than they are consuming

12. Which of the following is an example of an exchange of financial assets? A. the exchange of butter for wheat

B. the exchange of information technology

C. the exchange of a fixed-rate loan for a floating-rate loan D. the exchange of gold for jewelry

13. For most countries, the subcategory that typically dominates the current account is __________.

A. unilateral transfers B. goods trade C. income trade D. services trade

14. When categorizing investments for the financial account component of the balance of payments the __________ is an investment where the investor has no incentive to control whereas the __________ is an investment where the investor wants to control over the assets.

A. direct investment, portfolio investment B. direct investment, indirect investment C. portfolio investment, indirect investment D. portfolio investment, direct investment

15. If a country’s merchandise exports exceed its imports by $50 million, services trade balance is net $30 million and unilateral transfers made in excess of those received by $5 million, what is the country’s current account balance? A. $85 million B. $75 million C. $15 million D. $25 million

1. Country A’s BOT is __________.

2. Country A’s current account balance is __________.

3. Suppose the changes in country A’s official reserves are zero in 2010, its capital and financial account balance MUST be __________.

4. If country A’s official reserves are recorded on the credit side by $10 million in 2010, its capital and financial account balance should be __________.

5. Based on the assumption of question 4, country A has BOP deficit or surplus in 2010? Explain.

6. What is the current account balance of a nation with a government budget deficit of $128 billion, private saving of $806 billion, and domestic capital formation of $777 billion?

III. Express the following operations in the Dutch balance of payments in T-accounts: (5 credits for each question, total credits 3 x 5 = 15)

a. A Dutch company exports

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