36) In general there is consensus that ________ should be free but there is no such consensus that ________ should be free. 36) ______ A) international trade; international goods trade B) international investment; international goods trade C) international trade; international investment D) international investment; international trade 37) The two major concerns about foreign direct investment are: 37) ______ A) national defense and taxes. B) who pays the taxes and who receives the taxes. C) who receives the profits and taxes. D) who controls the assets and who receives the profits. 38) Portfolio investment is capital invested in activities that are ________ rather than made for ________. 38) ______ A) profit motivated; control B) long term; profit C) control motivated; profit D) short term; the long term 39) Under an international regime of fixed exchange rates, countries with a BOP ________ should consider ________ their currency while countries with a BOP ________ should consider ________ their currency. 39) ______ A) surplus, revaluing; deficit, devaluing B) deficit, devaluing; surplus, devaluing C) deficit, revaluing; surplus, revaluing D) surplus, devaluing; deficit, revaluing 40) If your company were to import and export textiles, the transactions would be recorded in the current account subcategory of ________. 40) ______ A) goods trade B) services trade C) current transfers D) income trade 41) The travel services provided to international travelers by United Airlines would be recorded in the current account subcategory of ________. 41) ______ A) current transfers B) goods trade C) income trade D) services trade 42) Anaconda Copper Inc. created a subsidiary in Chile last year to mine copper ore. The proportion of net income paid back to the parent company as a dividend would be recorded in the current account subcategory of ________. 42) ______ A) current transfers B) services trade C) goods trade D) income trade 43) The subcategory that typically dominates the current account is ________. 43) ______ A) income trade B) goods (merchandise) trade C) services trade D) transfer accounts 44) In 2007 the United States posted a current account deficit of -$731 billion. The bulk of the negative value came from 44) ______ A) a goods trade deficit. B) an income trade deficit. C) a net transfer deficit. D) an income balance deficit. 45) Over the last two decades the surplus on U.S. services trade has typically been ________ the deficit on U.S. goods trade. 45) ______ A) greater than B) less than C) equal to D) The relationship is constantly shifting from greater than to less than. 46) The BOP must be in balance but the current account need not be. 46) ______ A) True B) False 47) Expenditures by U.S. tourists in foreign countries for foreign goods or services are factored into BOP calculations. 47) ______ A) False B) True 48) Balance of payment (BOP) data may be important for any of the following reasons: 48) ______ A) The BOP is an important indicator of a country's foreign exchange rate. B) Changes in a country's BOP may signal a change in controls over payment of dividends and interest. C) BOP data helps to forecast a country's market potential, especially in the short run. D) all of the above 49) From an effect point of view, a country experiencing a serious BOP ________ is more likely to see exports ________ than otherwise. 49) ______ A) deficit; expand B) surplus; expand C) surplus; contract D) none of the above 50) Which of the following would NOT be considered a typical BOP transaction? 50) ______ A) A U.S. tourist purchases gifts at a museum in London. B) The U.S. subsidiary of European financial giant, Credit Suisse, pays dividends to its parent in Zurich. C) Toyota U.S.A. is a U.S. distributor of automobiles manufactured in Japan by its parent company. D) All are example of BOP transactions. 51) Which of the following is NOT a part of the Current Account of BOP? 51) ______ A) Net export/import of services. B) Net portfolio investment. C) Balance of Trade. D) Net export/import of goods. 52) Which of the following is NOT part of the Financial Account of the BOP? 52) ______ A) Net portfolio investment. B) Net import/export of services. C) Net foreign direct investment. D) Other Financial items. 53) Which of the following is NOT an item to be considered in BOP calculations? 53) ______ A) A consumer buys a VCR made in Korea from a Florida Wal-Mart store. B) A U.S.-based firm manages the development of an oil field in Kazakhstan. C) A U.S. citizen living in Minnesota travels to Winnipeg, Canada and buys a case of LaBatt's Canadian beer. D) Purchase of a U.S. Treasury Bill by a foreign resident. 54) The balance of payments 54) ______ A) records all international transactions for a country over a period of time. B) determines the eligibility of countries for IMF aid. C) adds up the value of all assets and liabilities of a country on a specific date. D) all of the above 55) Regime structures like the gold standard required no cooperative policies among countries, only the assurance that all would abide by the "rules of the game." 55) ______ A) True B) False 57) In the decade since 2000, the U.S. has experienced its largest bilateral trade deficits with the countries of China and Japan. 57) ______ A) True B) False 58) According to the authors, what is the single most important mandate of the European Central Bank? 58) ______ A) Promote price stability within the European Union. B) Promote international trade for countries within the European Union. C) Establish an EMU trade surplus with the United States. D) Price, in euros, all products for sale in the European Union. 59) Which of the following is a way in which the euro affects markets? 59) ______ A) Currency risks and costs related to exchange rate uncertainty are reduced. B) Consumers and business enjoy price transparency and increased price-based competition. C) Countries within the Euro zone enjoy cheaper transaction costs. D) all of the above 60) For the three years from early 2002 to early 2005, the euro maintained a strong and steady rise in value against the U.S. dollar (USD). Which of the following were NOT a contributing factor in the assent of the euro and the decline in the dollar? 60) ______ A) A general weakening of the dollar after the attacks of September 11, 2001. B) Severe U.S. balance of payments deficits. C) Large U.S. balance of payment surpluses. D) All of the above were contributing factors. 61) In January 2002, the Argentine Peso changed in value from Peso1.00/$ to Peso1.40/$, thus, the Argentine Peso ________ against the U.S. dollar. 61) ______ A) remained neutral B) strengthened C) weakened D) all of the above 62) In January 2000 Ecuador officially replaced its national currency, the Ecuadorian sucre, with the U.S. dollar. This practice is known as ________. 62) ______ A) dollarization. B) a Yankee bailout. C) bi-currencyism. D) sucrerization. 63) The United States currently uses a ________ exchange rate regime. 63) ______ A) pegged B) crawling peg C) fixed D) floating 64) Based on the premise that, other things equal, countries would prefer a fixed exchange rate, which of the following statements is NOT true? 64) ______ A) Fixed exchange rate regimes necessitate that central banks maintain large quantities of international reserves for use in the occasional defense of the fixed rate. B) Fixed rates provide stability in international prices for the conduct of trade. C) Fixed rates are inherently inflationary in that they require the country to follow loose monetary and fiscal policies. D) Stable prices aid in the growth of international trade and lessen exchange rate risks for businesses. 65) Which of the following is NOT an attribute of the "ideal" currency? 65) ______ A) Monetary independence. B) Exchange rate stability. C) Full financial integration. D) All are attributes of an ideal currency. 66) World War I caused the suspension of the gold standard for fixed international exchange rates because the war 66) ______ A) cost too much money. B) used gold as the main ingredient in armament plating. C) lasted too long. D) interrupted the free movement of gold. 67) The post WWII international monetary agreement that was developed in 1944 is known as the ________. 67) ______ A) Yalta Agreement. B) Bretton Woods Agreement. C) League of Nations. D) United Nations. 68) Another name for the International Bank for Reconstruction and Development is ________. 68) ______ A) the World Bank B) the Recon Bank C) the Marshall Plan D) the European Monetary System 69) The International Monetary Fund (IMF) 69) ______ A) in recent years has provided large loans to Russia, South Korea, and Brazil. B) aids countries with balance of payment and exchange rate problems. C) was created as a result of the Bretton Woods Agreement. D) is all of the above. 70) Which of the following led to the eventual demise of the fixed currency exchange rate regime worked out at Bretton Woods? 70) ______ A) Differential rates of inflation across member nations. B) Widely divergent national monetary and fiscal policies among member nations. C) Several unexpected economic shocks to member nations. D) all of the above