31. A currency depreciation will begin to
improve the trade balance immediately

A. If the demand for imports and exports are inelastic.

B. If the demand for
imports and exports are elastic.

C. If imports decrease and exports decrease.

D. None of the above

32. When a country's currency depreciates against the currencies of major
trading partners,

A. The country's exports
tend to rise and imports fall.

B. The country's exports tend to fall and imports rise.

C. The country's exports tend to rise and imports rise.

D. The country's exports tend to fall and imports fall.

33. A depreciation will begin to improve the trade balance immediately if

A. Imports and exports are
responsive to the exchange rate changes.

B. Imports and exports are inelastic to the exchange rate changes.

C. Consumers exhibit brand loyalty and price inelasticity

D. b) and c)

34. In the short run a currency depreciation can make a trade balance worse if

A. There is no domestic
producer of an import

B. There is no domestic buyer for an import

C. There is no export market for a country's output

35.

What is the correct label for the vertical axis in the J-curve?

A. Time

B. Change in the Trade
Balance

C. Size of Trade Balance

D. Size of Merchandise Trade Balance

36. In the long run, both exports and imports tend to be

A. Unresponsive to changes in exchange rates

B. Responsive to changes
in exchange rates

C. Both a) and b)

D. None of the above

37. With regard to the capital account

A.

The capital account balance measures the difference between U.S. sales of
assets to foreigners and U.S.

purchases of foreign assets.

B. U.S. sales (or exports) of assets are recorded as credits, as they result in
capital inflow.

C. U.S. purchases (imports) of foreign assets are recorded as debits, as they
lead to capital outflow.

D. All of the above

38. The difference between Foreign Direct Investment and Portfolio Investment
is that:

A.

Portfolio Investment mostly represents the sale and purchase of foreign
financial assets such as stocks

and bonds that do not involve a transfer of control.

B.

Foreign Direct Investment mostly represents the sale and purchase of foreign
financial assets such as

stocks whereas Portfolio Investment mostly involves the sales and purchase of
foreign bonds.

C.

Foreign direct investment is about buying land and building factories, whereas
portfolio investment is

about buying stocks and bonds.

D. All of the above

39. In the latter half of the 1980s, with a strong yen, Japanese firms

A. Faced difficulty exporting

B. Could better afford to acquire U.S. assets that had become less expensive in
terms of yen.

C. Financed a sharp increase in Japanese FDI in the United States

D. All of the above

40. International portfolio investments have boomed in recent years, as a
result of

A. A depreciating U.S. dollar

B. Increased gasoline and other commodity prices.

C. The general relaxation
of capital controls and regulation in many countries

D. None of the above




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