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Exam 14: The Foreign Sector

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Question 31

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The following balance-of-payments data are for the hypothetical nation of Zabella. All figures are in billions of dollars. $\begin{array} { | l | c | } \hline \text { Merchandise exports } & + \$ 80 \\\hline \text { Merchandise imports } & - 70 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 25 \\\hline \text { Investment income } & + 5 \\\hline \text { Transfers } & - 5 \\\hline \text { Capital and financial inflows } & + 13 \\\hline \begin{array} { l } \text { Capital and financial } \\\text { outflows }\end{array} & - 23 \\\hline \text { Changes in official reserves } & + 5 \\\hline\end{array}$ -Zabella's capital account and financial account balance shows a:

A) deficit of $10 billion
B) surplus of $5 billion
C) deficit of $28 billion
D) surplus of $28 billion
E) surplus of $10 billion

F) A) and B)
G) None of the above

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Question 32

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For Jane Jacobs,corporate mergers and acquisitions:

A) are an important way that free-enterprise economies ensure efficiency in their corporate sectors
B) are economically beneficial as long as they involve businesses in different industries
C) are economically beneficial as long as they involve businesses that were previously rivals
D) are an example of a monstrous hybrid in which businesspeople begin acting like rulers
E) promote efficiency as long as they involve businesses that were previously connected through the exchange of intermediate products

F) B) and D)
G) A) and D)

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Question 33

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Which of the following leads to a negative payment in Canada's balance-of-payments accounts?

A recession in Canada would most likely:

Under the managed float system of exchange rates:

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero) . All amounts are in billions of dollars $\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$ -Which of the following is not included in the current account of a nation's balance of payments?

If Canada has full employment and the Canadian dollar dramatically depreciates in value,we can expect:

In considering pounds and Canadian dollars,we can say that when the price of pounds in terms of Canadian dollars rises:

Assume that,under a system of flexible exchange rates,Mexicans decide to increase their financial investment in Canada.As a result:

The following table contains hypothetical data for Canada's balance of payments (the statistical discrepancy is assumed to be zero) . All amounts are in billions of dollars $\begin{array} { | l | l | } \hline \text { Merchandise exports } & \$ 137 \\\hline \text { Merchandise imports } & - 128 \\\hline \text { Service exports } & + 20 \\\hline \text { Service imports } & - 26 \\\hline \text { Investment income } & - 18 \\\hline \text { Transfers } & + 4 \\\hline \text { Other financial investments } & - 3 \\\hline \text { Portfolio and direct } & + 12 \\\text { investments } & \\\hline \text { Capital account flows } & + 11 \\\hline \text { Changes in official reserves } & - 9 \\\hline\end{array}$ -If a nation's merchandise exports are $55 billion,while its merchandise imports are $50 billion,we can conclude with certainty that this nation is experiencing a:

Under a system of flexible exchange rates,an increase in the international value of a nation's currency will: