Question

1. If China were to adopt a floating exchange-rate regime, it would:

a. cause the Chinese trade balance to fall.

b. cause the U.S. trade balance with China to fall.

c. force the U.S. to adopt a fixed exchange rate to maintain the balance of trade.

d. de-stabilize the entire world economy.

2. When Pam from Pennsylvania buys stock in Ford Motor Co., she is contributing to:

a. domestic portfolio investment in the U.S.

b. capital outflow for the U.S.

c. capital inflow for the U.S.

d. foreign direct investment for the U.S.

3. When interest rates in the U.S. increase, we could expect:

a. more foreigners investing in U.S. assets.

b. less foreigners investing in U.S. assets.

c. more U.S. citizens investing abroad.

d. less U.S. citizens investing in U.S. assets.

4. If we consider the savings, investment, and net exports in the United States in recent years, the gap between savings and investment is almost exactly:

a. the government deficit.

b. the balance of payments.

c. direct foreign investment.

d. the trade balance.

5. For any given country, the net capital outflows to all other countries equal:

a. net exports to all other countries.

b. net capital inflows from all other countries.

c. national savings.

d. net foreign direct investment to all other countries.

Answer 1

1 - Option A.

Cause the chinese trade balance to fall

2 - Option A

Domestic portfolio investment in US

The state given lies in US only. Hence this will be domestic investment only

3 - Option A

More foreigners investing in US assets

This will enable the US investors to yield high returns

4 - Option B

The balance of payment

5 - Option D

Net foreign direct investment to all other countries.