FIN 4303- $0.5 per every CORRECT answer

QUESTION 1

Suppose Russia's GDP increases at a faster rate relative to its trading partners over the course of the year.   What will be the immediate impact on Russia's balance of trade?

increase

decrease

remain constant

cannot be determined

QUESTION 2

Assume that the American government decreases its quota on Japanese manufactured cars.  Which of the following will occur, all else being equal?

The US BOT will decrease.

The Japanese BOT will decrease.

The US offical reserve account will decrease.

The Japanese official reserve account will increase.

QUESTION 3

According to the J-curve theory, a sudden depreciation in a nation's currency will cause a temporary decrease in the balance of trade.

 True

 False

QUESTION 4

Generally, there is an inverse relationship between a country's income and its demand for imports.

 True

 False

QUESTION 5

Transactions between the US and the rest of the world are shown below.

US citizens spend 50 million dollars visiting China.

American companies sell 30 million dollars worth of stock to foreign investors.

US citizens receive 10 million dollars worth of dividend payments from foreign corporations.

US government buys 5 million dollars worth of bonds.

American citizens purchase 35 million dollars worth of Japanese produced vehicles.

US government buys 18 million dollars worth of gold.

Ford sells 80 million dollars worth of cars overseas.

US corporations receive 4 million dollars in interest from foreign corporations.

US citizens send 16 million dollars in disaster relief to Haiti.

What would be the initial impact that the US balance trade would have on the value of the dollar?

The dollar would increase

The dollar would decrease

The dollar would remain constant

Cannot be determined

QUESTION 6

A  depreciation in the value of a domestic country's currency will tend to lead to an increase in that country's balance of trade in the long run, all else being equal.

true

false

QUESTION 7

All else being equal, an increase in a country's inflation rate will tend to increase the demand for that country's currency in the foreign exchange market.

true

false

QUESTION 8

Switzerland's national income (GDP) is growing dramatically compared to its trading partners, which will have an impact on Switzerland's balance of trade.  Which of the following actions could the Swiss government use to counteract the effect that its growing GDP has on its balance of trade?

Swiss government increases quotas on imports.

Swiss government decrease tariffs on imports.

Swiss government increases the supply of Swiss francs in the foreign exchange market.

Swiss government sells a portion of its gold reserves in exchange for Swiss francs.

QUESTION 9

Since supply and demand for a currency are constant (primarily due to government intervention), currency values seldom fluctuate.

 True

 False

QUESTION 10

The forward market deals with the exchange of foreign currency for future delivery.

 True

 False