International Trade and Finance

Question 1

What is the balance of payment (BOP)?

Answer 1

system to keep track of transactions between countries over a period of time

Question 2

What are the two types of BOP?

Answer 2

current account (CA) and capital + finance account (CFA)

Question 3

What variables are involved in CA?

Answer 3

1. net exports
2. money transfers
3. investment income
4. net unilateral transfers.

Question 4

What variables are involved in CFA?

Answer 4

1. balance of payments for assets between countries
2. financial capital transfers

Question 5

Is purchasing sushi from Japan CA or CFA?

Answer 5

CA (no interest rate, but from foreign country)

Question 6

Is purchasing a bond from Luxembourg CA or CFA?

Answer 6

CFA (because it has interest rate from another country)

Question 7

CA + CFA = ?

Answer 7

0

Question 8

What are unilateral transfers?

Answer 8

Money flowing from a country (perhaps in the form of global charities or military aid)

Question 9

Before: 1$ for 1 yen
After: 1$ for 5 yen

Answer 9

$ has appreciated