Final Exam Flashcards
The current account (CA) equals to
A. Y-(C-I+G)
B. Y+(C+I+G)
C. Y-(C+I+G)
D. Y-(C+I-G)
C. Y-(C+I+G)
What could drive the current account deficits in a country?
A. High Consumption
B. Low Investment
C. High Private Savings
D. High Income
A. High Consumption
Every international transition automatically enters the balance of payments?
A. Once either as a credit or as a debit.
B. Twice, once as a credit and once as a debit.
C. Once as a credit.
D. Twice, both as a debit
B. Twice, once as a credit and once as a debit
A current account surplus implies that?
A. The Country is a net lender with the rest of the world.
B. The country is running a net capital account surplus.
C. Foreign investment in domestic securities is at a very low levels.
D. All of the above
A. The country is a net lender with the rest of the world.
An American company sells its corporate bonds to a foreigner represents?
A. A credit in the U.S. financial account
B. A credit in the U.S. current account.
C. A debit in the U.S. financial account.
D. A debit in the U.S. current account
A. A credit in the U.S. financial account.
Suppose you open a Mexican peso bank deposit with 100 U.S. dollars when the exchange rate is 10 pesos per dollar. The peso deposit pays 20% per year interest. After one year the exchange rate equals 12 pesos per dollar. How many dollars is your peso deposit worth after one year?
A. $0
B. $100
C. $120
D. $150
B. $100
Suppose in London £/$ = 0.5 while in New York £/SF = 0.2. The corresponding cross rate (SF/$) is?
A. 2.5
B. 2
C. 0.1
D. 0.3
A. 2.5
If Chinese residents increased their purchase of computers from the U.S., the Chinese central bank would need to in the foreign exchange market to main the fixed exchange rate of the Chinese yuan against the U.S. dollar?
A. Sell Chinese government bonds.
B. Buy U.S. treasury bonds.
C. Buy Chinese yuan and sell U.S. dollars
D. Buy U.S. dollars and sell Chinese yuan
C. Buy Chinese yuan and sell U.S. dollars
The essential feature of a ______ is that it immediately fixes the rate at which a specified amount of one currency is to be delivered in exchange for a specific amount of another at a future date.
A. Spot contract
B. Forward contract
C. Option contract
D. Swap contract
B. Forward contract
The euro is said to be selling at a ______ if the spot dollar price is $1.18 and the nine month forward rate is $1.16.
A. Forward discount
B. Forward premium
C. Forward spread
D. Flat rate
A. Forward discount
The covered return from a foreign investment is?
A. The domestic interest rate plus the forward premium (discount).
B. The foreign interest rate plus the forward premium (discount).
C. The nominal interest rate minus inflation.
D. The real interest rate.
B. The foreign interest rate plus the forward premium (discount).
When one country has higher nominal interest rates than another country, the high-interest- rate currency is expected to _____ relative to the low-interest-rate currency.
A. Depreciate
B. Appreciate
C. Stay constant
D. None of the above
A. Depreciate
Suppose that at some point the spot exchange rate is equal to 100 yen per one U.S. dollar, while the interest rate in dollars is 6% and the interest rate in yen is 1%. What is the approximate forward rate implied by the covered interest parity?
A. 95 yen per dollar
B. 105 yen per dollar
C. 107 yen per dollar
D. 92 yen per dollar
A. 95 yen per dollar
We expect the PPP to hold better?
A. For annual data than monthly data.
B. For high-inflation countries.
C. In the long run.
D. All of the above
D. All of the above.
If the U.S. dollar appreciates against the Japanese yen at a faster rate than the Japanese inflation rate exceeds the U.S. inflation rate, then the U.S. dollar appears?
A. Depreciated
B. Overvalued
C. Undervalued
D. Unchanged
B. Overvalued
