Question

1. Credit items in a countries balance of payments correspond to anything:

a) that increases supply for foreign currency

b) that increases demand for foreign currency

c) that decreases domestic money supply.

d)merchandise imports

e) capital outflows

2. The balance of payments is:

a) positive if the country is a lender in the international capital market

b) negative if the country is a borrower in the international capital market

c)positive if the country has a trade surplus

d) always is 0

e)negative if the country has a trade deficit.

3. The international capital movement has a role and it is to:

a) Direct a country's savings into investment in another country

b)substitute for international labor movements

c) Take wealth from rich countries and give it to poor countries

d) Get capital that is needed to low interest economies that are suffering from capital shortage

e) Take advantage of the opportunities that there are in developing countries.

4. Trade barriers are put in place because:

a) Many believe that free trade does not increase wealth

b) they protect certain people

c) They protect national security

d) They offset unfair competition from producers that are foreign

e) All of the above

Answer 1

1) Credit items are considered as an inflow of foreign exchange because it includes the items for which money is received from foreign countries. (Option a)

2) It represents the sum of capital and current account. Since each transaction in one account has a reversible transaction in the other, the accounts are balanced, implying the net sum is 0. (Option d)

3) International capital movement is the movement of capital between nations when there are interest rate differences. High interest rate economies attract savings from other countries. (Option a)

4) Option e).