International Flow of Funds

 1.
Recently, the
U.S. experienced an annual balance of trade representing a __________.
A) large
surplus (exceeding $100 billion)
B) small
surplus
C) level
of zero
D) deficit

2. A high home inflation rate relative to other
countries would _______ the home country’s current account balance, other
things equal. A high growth in the home income level relative to other
countries would _______ the home country’s current account balance, other things
equal.
A) increase;
increase
B) increase;
decrease
C) decrease;
decrease
D) decrease;
increase

3. If a country’s government imposes a tariff on
imported goods, that country’s current account balance will likely __________
(assuming no retaliation by other governments).
A) decrease
B) increase
C) remain
unaffected
D) either
A or C are possible

4. _________ purchases more U.S. exports than
any other country.
A) Japan
B) United
Kingdom
C) Mexico
D) Canada

5. An increase in the current account deficit
will place _______ pressure on the home currency value, other things equal.
A) upward
B) downward
C) no
D) upward
or downward (depending on the size of the deficit)

6. If the home currency begins to appreciate
against other currencies, this should ____________ the current account balance,
other things equal (assume that substitutes are readily available in the
countries, and that the prices charged by firms remain the same).
A) increase
B) have
no impact on
C) reduce
D) all
of the above are equally possible

7. The International Financial Corporation was
established to:
A) enhance
development solely in Asia through grants.
B) enhance
economic development through non‑subsidized loans (at market interest rates).
C) enhance
economic development through low‑interest rate loans (below‑market rates).
D) enhance
economic development of the private sector through investment in stock of
corporations.

8. The World Bank was established to:
A) enhance
development solely in Asia through grants.
B) enhance
economic development through non‑subsidized loans (at market interest rates).
C) enhance
economic development through low‑interest rate loans (below‑market rates).
D) enhance
economic development of the private sector through investment in stock of
corporations.

9. The International Development Association was
established to:
A) enhance
development solely in Asia through grants.
B) enhance
economic development through non‑subsidized loans (at market interest rates).
C) enhance
economic development through low‑interest rate loans (below‑market rates).
D) enhance
economic development of the private sector through investment in stock of
corporations.

10. Which of the following would likely have the
least direct influence on a country’s current account?
A) inflation.
B) national
income.
C) exchange
rates.
D) tariffs.
E) a
tax on income earned from foreign stocks.