46 Free Test Bank for International Financial Management 12th Edition Jeff Madura Multiple Choice Questions 1. Which of the following countries purchases
... [Show More] the largest amount of exports by U.S. firms? a.Mexico b.Japan c.Canada d.France 2. Which of the following will probably not result in an increase in a country's current account balance (assuming everything else constant)? a.A decrease in the country's rate of inflation b.A decrease in the country's national income level c.An increase in government restrictions in the form of tariffs or quotas d.An appreciation of the country's currency e.All of the above will result in an increased current account balance. 3. In recent years, the U.S. has had a relatively (compared to other countries) ____ balance of trade ____ with China. a.small; surplus b.large; surplus c.small; deficit d.large; deficit 4. The U.S. typically has a balance of trade surplus in its trade with ____. a.China b.Japan c.A and B d.none of the above 5. The direct foreign investment positions by U.S. firms have generally ____ over time. Restrictions by governments on direct foreign investment have generally ___ over time. a.increased; increased b.increased; decreased c.decreased; decreased d.decreased; increased 6. ____ purchases more U.S. exports than the other countries listed here. a.Italy b.Spain c.Mexico d.Canada 7. The International Development Association was established to: a.enhance development solely in Asia through grants. b.enhance economic development through non-subsidized loans (at market interest rates). c.enhance economic development through low-interest rate loans (below-market rates). This study source was downloaded by 100000849816735 from CourseHero.com on 01-20-2023 19:46:18 GMT -06:00 https://www.coursehero.com/file/29395386/Test-Bank-Finance-12th-Edition-Jeff-Maduradocx/ contact: royfields212@gmail.com d.enhance economic development of the private sector through investment in stock of corporations. 8. According to the text, international trade (exports plus imports combined) as a percentage of GDP is: a.higher in the U.S. than in European countries. b.lower in the U.S. than in European countries. c.higher in the U.S. than in about half the European countries, and lower in the U.S. than the others. d.about the same in the U.S. as in European countries. 9. Also known as the "central banks' central bank," the ____ attempts to facilitate cooperation among countries with regard to international transactions and provides assistance to countries experiencing a financial crisis. a.World Bank b.International Financial Corporation (IFC) c.World Trade Organization d.International Development Association (IDA) e.Bank for International Settlements (BIS) 10. Which of the following would likely have the least direct influence on a country's current account? a.inflation. b.national income. c.exchange rates. d.tariffs. e.a tax on income earned from foreign stocks. 11. Over the last several years, international trade has generally: a.increased for most major countries. b.decreased for most major countries. c.stayed about constant for most major countries. d.increased for about half the major countries and decreased for the others. 12. Japan's annual interest rate has been relatively ____ compared to other countries for several years, because the supply of funds in its credit market has been very ____. a.low; small b.high; small c.low; large d.high; large 13. The North American Free Trade Agreement (NAFTA) increased restrictions on: a.trade between Canada and Mexico. b.trade between Canada and the U.S. c.direct foreign investment in Mexico by U.S. firms. d.none of the above. This study source was downloaded by 100000849816735 from CourseHero.com on 01-20-2023 19:46:18 GMT -06:00 https://www.coursehero.com/file/29395386/Test-Bank-Finance-12th-Edition-Jeff-Maduradocx/ 14. Which of the following is not likely to represent a strategy by the government of Country X to reduce its balance of trade deficit with Country Y? a.The government of Country X eliminates environmental restrictions. b.The government of Country X subsidizes firms in its country to facilitate dumping. c.The government of Country X provides tax breaks to firms in specific industries. d.The government of Country X removes a tariff on goods imported from Country Y. 15. Without the international capital flows, there would be ____ funding available in the U.S. across all risk levels, and the cost of funding would be ____ regardless of the firm's risk level. a.more; lower b.more; higher c.less; lower d.less; higher 16. ____ represent aid, grants, and gifts from one country to another. a.Transfer payments b.Factor income c.The balance of trade d.The balance of payments e.The capital account 17. If a country's government imposes a tariff on imported goods, that country's current account balance will likely ____ (assuming no retaliation by other governments). a.decrease b.increase c.remain unaffected d.either A or C are possible 18. The World Bank's Multilateral Investment Guarantee Agency (MIGA): a.offers various forms of export insurance. b.offers various forms of import insurance. c.offers various forms of exchange rate risk insurance. d.provides loans to developing countries. e.offers various forms of political risk insurance. 19. A General Agreement on Tariffs and Trade (GATT) accord in 1993 called for: a.increased trade restrictions outside of North America. b.lower trade restrictions around the world. c.uniform environmental standards around the world. d.uniform worker health laws. 20. "Dumping" is used in the text to represent the: a.exporting of goods that do not meet quality standards. b.sales of junk bonds to foreign countries. c.removal of foreign subsidiaries by the host government. This study source was downloaded by 100000849816735 from CourseHero.com on 01-20-2023 19:46:18 GMT -06:00 https://www.coursehero.com/file/29395386/Test-Bank-Finance-12th-Edition-Jeff-Maduradocx/ d.exporting of goods at prices below cost. 21. A high home inflation rate relative to other countries would ____ the home country's current account balance, other things equal. A high growth in the home income level relative to other countries would ____ the home country's current account balance, other things equal. a.increase; increase b.increase; decrease c.decrease; decrease d.decrease; increase 22. The ____, an accord among 117 nations, called for lower tariffs around the world. a.General Agreement on Tariffs and Trade (GATT) b.North American Free Trade Agreement (NAFTA) c.Single European Act of 1987 d.European Union Accord e.None of the above 23. Which of the following is mentioned in the text as a possible means by which the government may attempt to improve its balance of trade position (increase its exports or reduce its imports). a.It could attempt to reduce its home currency's value. b.The government could require firms to engage in outsourcing. c.The government could require that its local firms pursue outsourcing. d.All of the above are mentioned. 24. Which is not a concern about the North American Free Trade Agreement (NAFTA)? a.its impact on U.S. inflation. b.its impact on U.S. unemployment. c.lower environmental standards in Mexico. d.different health laws for workers in Mexico. 25. A weak home currency may not be a perfect solution to correct a balance of trade deficit because: a.it reduces the prices of imports paid by local companies. b.it increases the prices of exports by local companies. c.it prevents international trade transactions from being prearranged. d.foreign companies may reduce the prices of their products to stay competitive. 26. An increase in the current account deficit will place ____ pressure on the home currency value, other things equal. a.upward b.downward c.no d.upward or downward (depending on the size of the deficit) 27. The demand for U.S. exports tends to increase when: a.economic growth in foreign countries decreases. This study source was downloaded by 100000849816735 from CourseHero.com on 01-20-2023 19:46:18 GMT -06:00 https://www.coursehero.com/file/29395386/Test-Bank-Finance-12th-Edition-Jeff-Maduradocx/ b.the currencies of foreign countries strengthen against the dollar. c.U.S. inflation rises. d.none of the above. 28.Which of the following would increase the current account of Country X? Country Y is Country X's sole trading partner. a.Inflation increases in countries X and Y by comparable amounts. b.Country X's and Country Y's currencies depreciate by the same amount. c.Country X imposes tariffs on imports from Country Y, and Country Y retaliates by imposing an identical tax on X's exports. d.The central banks of Country X and Country Y reduce the money supply to increase interest rates. e.Country X imposes a quota on imports, and Country Y retaliates by imposing an identical quota on X's exports. 29. Assume the U.S. has a balance of trade surplus with the country of Thor. When individuals in Thor manufacture CDs and DVDs that look almost exactly like the original product produced in the U.S. and other countries, they ____ the U.S. balance of trade surplus with Thor. This activity is called ____. a.reduce; flipping b.reduce; pirating c.increase; pirating d.increase; flipping 30. Which of the following statements is not true? a.Exporters commonly complain that they are being mistreated because the currency of their country is too weak. b.Outsourcing affects the balance of trade because it means that a service is purchased in another country. c.Sometimes, trade policies are used to punish countries for various actions. d.Tariffs imposed by the EU have caused some friction between EU countries that commonly import products and other EU countries. e.All of the above are true. 31. The International Financial Corporation was established to: a.enhance development solely in Asia through grants. b.enhance economic development through non-subsidized loans (at market interest rates). c.enhance economic development through low-interest rate loans (belowmarket rates). d.enhance economic development of the private sector through investment in stock of corporations. 32. An increase in the use of quotas is expected to: a.reduce the country's current account balance, if other governments do not retaliate. b.increase the country's current account balance, if other governments do not retaliate. c.have no impact on the country's current account balance unless other governments retaliate. d.increase the volume of a country's trade with other countries. This study source was downloaded by 100000849816735 from CourseHero.com on 01-20-2023 19:46:18 GMT -06:00 https://www.coursehero.com/file/29395386/Test-Bank-Finance-12th-Edition-Jeff-Maduradocx/ 33. The primary component of the current account is the: a.balance of trade. b.balance of money market flows. c.balance of capital market flows. d.unilateral transfers. 34. Intracompany trade makes up approximately ____ percent of all international trade. a.50 b.70 c.25 d.13 e.5 35. The ____ is the difference between exports and imports. a.balance of trade b.balance on goods and services c.balance of payments d.current account e.capital account 36. Which of the following is not a goal of the International Monetary Fund (IMF)? a.To promote cooperation among countries on international monetary issues b.To promote stability in exchange rates c.To enhance a country's long-term economic growth via the extension of structural adjustment loans d.To promote free trade e.To promote free mobility of capital funds across countries 37. The World Bank was established to: a.enhance development solely in Asia through grants. b.enhance economic development through non-subsidized loans (at market interest rates). c.enhance economic development through low-interest rate loans (belowmarket rates). d.enhance economic development of the private sector through investment in stock of corporations. 38. ____ is (are) income received by investors on foreign investments in financial assets (securities). a.Portfolio income b.Direct foreign income c.Unilateral transfers d.Factor income 39. The "J curve" effect describes: a.the continuous long-term inverse relationship between a country's current This study source was downloaded by 100000849816735 from CourseHero.com on 01-20-2023 19:46:18 GMT -06:00 https://www.coursehero.com/file/29395386/Test-Bank-Finance-12th-Edition-Jeff-Maduradocx/ account balance and the country's growth in gross national product. b.the short-run tendency for a country's balance of trade to deteriorate even while its currency is depreciating. c.the tendency for exporters to initially reduce the price of goods when their own currency appreciates. d.the reaction of a country's currency to initially depreciate after the country's inflation rate declines. 40. Recently, the U.S. experienced an annual balance of trade representing a ____. a.large surplus (exceeding $100 billion) b.small surplus c.level of zero d.deficit 41. As a result of the European Union, restrictions on exports between ____ were reduced or eliminated. a.member countries and the U.S. b.member countries c.member countries and European non-members d.none of the above 42. Like the International Monetary Fund (IMF), the ____ is composed of a collection of nations as members. However, unlike the IMF, it uses the private rather than the government sector to achieve its objectives. a.World Bank b.International Financial Corporation (IFC) c.World Trade Organization (WTO) d.International Development Association (IDA) e.Bank for International Settlements (BIS) 43. Direct foreign investment into the U.S. represents a ____. a.capital inflow b.trade inflow c.capital outflow d.trade outflow 44. According to the "J curve effect," a weakening of the U.S. dollar relative to its trading partners' currencies would result in an initial ____ in the current account balance, followed by a subsequent ____ in the current account balance. a.decrease; increase b.increase; decrease c.decrease; decrease d.increase; increase 45. If the home currency begins to appreciate against other currencies, this should ____ the current account balance, other things equal (assume that substitutes are readily available in the countries, and that the prices charged by firms remain the same). a.increase b.have no impact on This study source was downloaded by 100000849816735 from CourseHero.com on 01-20-2023 19:46:18 GMT -06:00 https://www.coursehero.com/file/29395386/Test-Bank-Finance-12th-Edition-Jeff-Maduradocx/ c.reduce d.all of the above are equally possible 46. Which of the following factors probably does not directly affect a country's capital account and its components? a.Inflation b.Interest rates c.Withholding taxes on foreign income d.Exchange rate movements e. All of the above will directly affect a country's capital account. This study source was downloaded by 100000849816735 from CourseHero.com on 01-20-2023 19:46:18 GMT -06:00 https://www.coursehero.com/file/29395386/Test-Bank-Finance-12th-Edition-Jeff-Maduradocx/ Powered by TCPDF (www.tcpdf.org) [Show Less]