MODULE 1.2

Question 1

This is the net of export and imports of goods (visible items).

Answer 1

visible trade

Question 2

concerns the system by which companies are directed and controlled. It is about having companies, owners and regulators become more accountable, efficient and
transparent, which in turn builds trust and confidence. Well-governed companies carry lower financial and non-financial risks and generate higher shareholder returns. They also have better access to external finance and reduce systemic risks due to corporate crises and financial scandals.

Answer 2

International Perspective: Corporate Governance (CG)

Question 3

is important to a lot of users. Investment managers, government policymakers, the central bank, businessmen, etc., all use the BOP data to make important decisions.

is affected by vital macroeconomic variables such as exchange rate, price levels, interest rates, employment, and GDP.

Answer 3

balance of payments data

Question 4

An increasingly important aspect of corporate governance is ____. Shareholders and customers/clients need to feel confident that their personal information is not being leaked or accessed by unauthorized users.

Answer 4

Security

Question 5

when imports are higher than exports

Answer 5

trade deficit

Question 6

These include factor payments and receipts. These are generally rent on property, interest on capital, and profits on investments.

Answer 6

Income receipts and payments

Question 7

It summarizes all payments and receipts by firms, individuals, and the government. The transactions can be both factor payments and transfer payments.

Answer 7

Balance of Payments / balance of international payments

Question 8

is a major part of corporate governance. Shareholders may reach out to the members of the community who don’t necessarily hold an interest in the company but who can nonetheless benefit from its goods or services.

Answer 8

Shareholder interest

Question 9

Foreign exchange reserves are maintained by the central bank to control the exchange rate and ultimately balance the BOP.

Answer 9

changes in foreign exchange reserves

Question 10

The balance of this visible trade is known as the ___

Answer 10

trade balance

Question 11

This is the net of exports and imports of services (invisible items). Transactions mainly consist of shipping, IT, banking, and insurance services.

Answer 11

Invisible trade

Question 12

These refer to payments that are not factor payments – for example, gifts or donations sent to the resident of a country by a non- resident relative.

Answer 12

Unilateral transfers to and from abroad

Question 13

are formed in a way to achieve very specific objectives, which generally exert a significant impact on the balance of payments. Policies can be formed with the objectives to induce or curb foreign inflows or outflows.

Answer 13

Monetary and fiscal policies

Question 14

when exports are higher than imports.

Answer 14

trade surplus

Question 15

is a statement that contains the transactions made by residents of a particular country with the rest of the world over a specific time period.

Answer 15

Balance of Payments / balance of international payments

Question 16

These are investments made by nonresidents in shares in the home country or investment in real estate in any other country.

Answer 16

investments to/from abroad

Question 17

The three major components of the capital account:

Answer 17

1. loans to and borrowing from abroad
2. investments to/from abroad
3. changes in foreign exchange reserves

Question 18

Two accounts of BOP

Answer 18

Current and Capital

Question 19

is used to finance the deficit in the current account or absorb the surplus in the current account.

Answer 19

Capital Account

Question 20

is financed by a surplus in the Capital account and vice versa. This can be done by borrowing more money from abroad or lending more money to non-residents.

Answer 20

Current account deficit

Question 21

is something altogether different from the daily operational management activities enacted by a company’s executives. It is a system of direction and control that dictates how a board of directors governs and oversees a company.

Answer 21

Corporate Governance

Question 22

Key Principle of Corporate Governance – Shareholder Primacy

Answer 22

First, there is the basic recognition of the importance of shareholders to any company – people who buy the company’s stock fund its operations

Second, from the basic recognition of shareholder importance follows the principle of responsibility to shareholders.

Question 23

These consist of all loans and borrowings given to or received from abroad. It includes both private sector loans, as well as public sector loans.

Answer 23

loans to and borrowing from abroad

Question 24

4 Major Components of Current Account

Answer 24

1. visible trade
2. trade balance
3. trade deficit
4. trade surplus

Question 25

key component of capital market development.

Answer 25

Corporate governance

Question 26

is best best explained with an example, and there is no better example than Enron Corp. Many of the executives used shady tactics and covert accounting methods to cover up the fact that they were essentially stealing from the company. Erroneous figures were passed along to the board of
directors, who failed to report the information to shareholders.

Answer 26

Poor corporate governance