QUESTION 17

1. Let a flexible exchange rate system. Assume a current account deficit of $100 billion. Then the capital account balance must be

a.

None of the answers is correct

b.

a surplus of $100 billion.

c.

a deficit of $100 billion.

d.

a surplus of something more than $100 million.

QUESTION 18

1. Suppose the following direct quotes are received for spot and 1month French Francs in New York: 0.126068, 46. Then the outright 30day forward quote for the French is:

a.

.125464

b.

.126474

c.

.126672

d.

.125662

QUESTION 19

1. Suppose annual inflation rates in the U.S. and Mexico are expected to be 6.5% and 75%, respectively, over the next several years. If the current spot rate for the Mexican peso is $0.05, then the best estimate of the peso's spot value in 3 years is

a.

$.00276

b.

$.01190

c.

$0.0113

d.

$.00321

QUESTION 20

1. The U.S. has imported more than it has exported every year for the last couple of decades. The persistent American trade deficits have been possible because the US has had a persistent surplus in the capital account.

True

False