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A) reveal a country’s assets.
B) suggest areas of concern in monetary and fiscal policy.
C) predict changes in the economic environment.
D) show how the country’s currency arrangement (fixed, pegged, floating) is valued.
88) The current account on the BOP has three subaccounts:
A) export, import, and capital.
B) tangible exports, tariff revenues, and capital.
C) fixed assets, current liabilities, and long-term debt.
D) merchandise, services, and unilateral transfers.
89) The balance part of the BOP is explained by
A) the accounts being double-entry, so they are always balanced.
B) imbalances showing immediately.
C) actions governments take to achieve the balance.
D) equal payments being made to all parties.
90) The U.S. current account deficit can be explained partially by
A) citizens of other nations wanting to hold dollars, and invest in the United States.
B) citizens of other nations wanting to avoid the dollar.
C) U.S. citizens exporting more than they are importing.
D) a lack of investment opportunities in the United States.
91) A purchase of foreign goods in the United States (goods that were imported from another
country) will be recorded in the BOP as
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A) an asset in the current account.
B) a debit in the current account.
C) no record, because the purchase is made in the United States.
D) a liability in the foreign transfer account.
FILL IN THE BLANK. Write the word or phrase that best completes each statement or
answers the question.
92) In the Bretton Woods system, the only currency redeemable for gold was ________.
93) Charles de Gaulle pushed the Bank of ________ to redeem its dollar holdings for gold,
resulting in the end of the Bretton Woods system.
94) A ________ contains holdings a country can draw on when needed to finance trade or
investments or to intervene in currency markets.
95) The ________ describes that when a national currency becomes a reserve currency, over
time, people lose confidence in it due to inevitable domestic deficits, and it loses value.
96) The general process of managing the risks incurred in wide currency rate shifts in the
floating exchange market is known as ________.
97) The Jamaica Agreement established the rules for the ________ exchange rate system.
98) After Bretton Woods, the major currencies floated in the currency markets, with their
value determined by ________.
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99) In a ________ currency arrangement strategy, a currency is readjusted periodically at a
fixed, preannounced rate or in response to changes in indicators.
100) ________ currencies can move against one another quickly and in large swings.
101) The Bank for ________ is an international organization of central banks that exists to
build cooperation to promote monetary stability
102) The ________ approach to exchange rate forecasting assumes that current fully prices
reflect all available information.
103) ________ policies are those that control the amount of money in circulation.
104) The ________ states that in an efficient market, like products will have like prices.
105) ________ is the simultaneous buying and selling to make a profit with no risk.
106) The real interest rate will be the nominal interest rate minus the expected rate of inflation,
known as the ________.
107) ________ is the amount of adjustment that must be made in the exchange rates for two
currencies for them to have equivalent purchasing power.
108) A currency that is used for international trade is known as a ________ currency.
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109) Foreign exchange quotations tend to be reported in international markets in terms of the
U.S. dollar and ________.
110) ________ is a sustained increase in prices.
111) The record of a country’s transactions with the rest of the world is the ________.
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
112) Describe how the Bretton Woods system affected international trade growth during the
1950s and 1960s.
113) Compare and contrast spot and forward exchange rates. Explain how each can be useful
to investors.
114) Discuss purchasing power parity. Relate the Big Mac application of this theory.
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115) Describe the three major types of taxation used by governments around the world to
generate revenue.
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Answer Key
Test name: Module 8
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