国际金融英文版习题Chapter3

Chapter1 balance of paymentsBalance of Payments Accounting1Balance of paymentsa)is defined as the statistical record of a country’s international transactions over acertain period of time presented in the form of a double-entry bookkeepingb)provides detailed information concerning the demand and supply of a country’scurrencyc)can be used to evaluate the performance of a country in international economiccompetitiond)all of the aboveAnswer: d2Generally speaking, any transaction that results in a receipt from foreignersa)Will be recorded as a debit, with a negative sign, in the U.S. balance of paymentsb)Will be recorded as a debit, with a positive sign, in the U.S. balance of paymentsc)Will be recorded as a credit, with a negative sign, in the U.S. balance ofpaymentsd)Will be recorded as a credit, with a positive sign, in the U.S. balance of payments Answer d3 Generally speaking, any transaction that results in a payment to foreignerse)Will be recorded as a debit, with a negative sign, in the U.S. balance of paymentsf)Will be recorded as a debit, with a positive sign, in the U.S. balance of paymentsg)Will be recorded as a credit, with a negative sign, in the U.S. balance ofpaymentsh)Will be recorded as a credit, with a positive sign, in the U.S. balance of payments Answer a)4 Suppose the McDonalds Corporation imports 100 tons of Canadian beef, paying for it by transferring the funds to a New York bank account kept by the Canadian Beef Conglomerate.i)Payment by McDonalds will be recorded as a debitj)The deposit of the funds by the seller will be recorded as a debitk)Payment by McDonalds will be recorded as a creditl)The deposit of the funds by the buyer will be creditAnswer: a5Since the balance of payments is presented as a system of double-entry bookkeeping,a)Every credit in the account is balanced by a matching debitb)Every debit in the account is balanced by a matching creditc)a) and b) are both trued)None of the aboveAnswer c)6 A country’s international transactions can be grouped into the following threemain types:a)current account, medium term account, and long term capital accountb)current account, long term capital account, and official reserve accountc)current account, capital account, and official reserve accountd)capital account, official reserve account, trade accountAnswer: c7Invisible trade refers to:a)services that avoid tax paymentsb)underground economyc)legal, consulting, and engineering servicesd)tourist expenditures, onlyAnswer: c8The current account is divided into four finer categories:a)Merchandise trade, services, income, and statistical discrepancy.b)Merchandise trade, services, income, and unilateral transfersc)Merchandise trade, services, portfolio investment, and unilateral transfersd)Merchandise trade, services, factor income, and direct investment Answer: b9Factor incomea)Consists largely of interest, dividends, and other income on foreigninvestments.b)Is a theoretical construct of the factors of production, land, labor, capital,and entrepreneurial ability.c)Is generally a very minor part of national income accounting, smaller thanthe statistical discrepancy.d)None of the aboveAnswer: aUSE THE FOLLOWING INFORMA TION TO ANSWER THE NEXT TWO QUESTIONS10 The entries in the “current account” and the “capital account”, combined together, can be outlined (in alphabetic order) as:(i)- direct investment (ii)- factor income (iii)- merchandise (iv)- official transfer (v)- other capital(vi)- portfolio investment (vii)- private transfer (viii)- services11Current account includesa)(i), (ii), and (iii)b)(ii), (iii), and (vii)c)(iv), (v), and (vii)d)(i), (v), and (vi) Answer: b12Capital account includesa)(i), (ii), and (iii)b)(ii), (iii), and (vii)c)(iv), (v), and (vii)d)(i), (v), and (vi)Answer: d13The difference between Foreign Direct Investment and Portfolio Investment is that:a)Portfolio Investment mostly represents the sale and purchase of foreign financialassets such as stocks and bonds that do not involve a transfer of control.b)Foreign Direct Investment mostly represents the sale and purchase of foreignfinancial assets such as stocks whereas Portfolio Investment mostly involves thesales and purchase of foreign bonds.c)Foreign direct investment is about buying land and building factories, whereasportfolio investment is about buying stocks and bonds.d)All of the aboveAnswer: a14In the latter half of the 1980s, with a strong yen, Japanese firmsa)Faced difficulty exportingb)Could better afford to acquire U.S. assets that had become less expensive interms of yen.c)Financed a sharp increase in Japanese FDI in the United Statesd)All of the aboveAnswer: d15International portfolio investments have boomed in recent years, as a result ofa) A depreciating U.S. dollarb)Increased gasoline and other commodity prices.c)The general relaxation of capital controls and regulation in many countriesd)None of the aboveAnswer: cAnswer: c)16The capital account measuresa)The sum of U.S. sales of assets to foreigners and U.S. purchases of foreignassets.b)The difference between U.S. sales of assets to foreigners and U.S. purchases offoreign assets.c)The difference between U.S. sales of manufactured goods to foreigners and U.S.purchases of foreign products.d)None of the aboveAnswer: b) page 6417When Honda, a Japanese auto maker, built a factory in Ohio,a)It was engaged in foreign direct investmentb)It was engaged in portfolio investmentc)It was engaged in a cross-border acquisitiond)None of the above.Answer: a) page 64.18The capital account may be divided into three categories:a)Cross-border mergers and acquisitions, portfolio investment, and otherinvestmentb)Direct investment, portfolio investment, and Cross-border mergers andacquisitionsc)Direct investment, mergers and acquisitions, and other investmentd)Direct investment, portfolio investment, and other investmentAnswer: d)19When Nestlé, a Swiss firm, bought the American firm Carnation, it was engaged in foreign direct investment. If Nestlé had only bought a non-controlling number ofshares of the firma)Nestlé would have been engaged in portfolio investmentb)Nestlé would have been engaged in a cross-border acquisitionc)It would depend if they bought the shares from an American or a Canadiand)None of the above.Answer: a)20Foreign direct investment (FDI) occursa)when an investor acquires a measure of control of a foreign businessb)when there is an acquisition, by a foreign entity in the U.S., of 10 percent ormore of the voting shares of a businessc)with sales and purchases of foreign stocks and bonds that do not involve atransfer of controld) a and bAnswer: d21Statistical discrepancy, which by definition represents errors and omissionsa)Cannot be calculated directlyb)Is calculated by taking into account the balance-of-payments identityc)Probably has some elements that are honest mistakes, it can’t all be moneylaundering and drugs.d)All of the aboveAnswer: d)22The statistical discrepancy in the balance-of-payments accountsa)Arise since recordings of payments and receipts are done at different times, indifferent places, possibly using different methods.b)Arise since some transactions (illegal transactions?) occur “off the books”.c)Represents omitted and misrecorded transactions.d)All of the aboveAnswer: d)23Regarding the statistical discrepancy in the balance-of-payments accountsa)There is some evidence that financial transactions may be mainly responsible forthe discrepancy.b)The sum of the balance on the capital account and the statistical discrepancy isvery close to the balance of the current account in magnitude.c)It tends to be positive one year and negative in others, so it’s safe to ignore itd)a) and b)Answer: d)24When a country must make a net payment to foreigners because of a balance-of-payments deficit, the central bank of the countrya)Should do nothingb)Should run down its official reserve assets (e.g. gold, foreign exchanges, andSDRs)c)Should borrow anew from foreign central banks.d)b) or c) will workAnswer: d)25Continued U.S. trade deficits coupled with foreigners’ desire to diversify their currency holdings away from U.S. dollarsa)could further diminish the position of the dollar as the dominant reserve currencyb)could affect the value of U.S. dollar (e.g. through the currency diversificationdecisions of Asian central banks)c)Could lend steam to the emergence of the euro as a credible reserve currencyd)All of the aboveAnswer: d26Currently, international reserve assets are comprised ofa)gold, platinum, foreign exchanges, and special drawing rights (SDRs)b)gold, foreign exchanges, special drawing rights (SDRs), and reserve positions inthe International Monetary Fund (IMF)c)gold, diamonds, foreign exchanges, and special drawing rights (SDRs)d)reserve positions in the International Monetary Fund (IMF), onlyAnswer: b27International reserve assets include “foreign exchanges”. These area)Special Drawing Rights (SDRs) at the IMFb)reserve positions in the International Monetary Fund (IMF)c)Foreign currency held by a country’s central bankd)None of the aboveAnswer: c28The most important international reserve asset, comprising 94 percent of the total reserve assets held by IMF member countries isa)Goldb)Foreign exchangesc)Special Drawing Rights (SDRs)d)Reserve positions in the International Monetary Fund (IMF)Answer: b29The vast majority of the foreign-exchange reserves held by central banks are denominated ina)Local currenciesb)U.S. dollarsc)Yend)EuroAnswer: b30The U.S. Trade Deficita)Is a capital account surplusb)Is a current account deficitc)Is both a capital account surplus and a current account deficitd)None of the aboveAnswer: c31Over the last several years the U.S. has run persistenta)Balance-of-payments deficitsb)Balance-of-payments surplusesc)Current Account deficitsd)Capital Account deficitsAnswer: c32More important than he absolute size of a country’s balance-of-payments disequilibriuma)is the nature and cause of the disequilibriumb)is whether it is a trade surplus or deficitc)is whether the local government is mercantilist or notd)Nothing is more important than he absolute size of a country’sbalance-of-payments disequilibriumAnswer: aThe Relationship between Balance of Payments and National Income AccountingFor questions in this section, the notation isY = GNP = national incomeC = consumptionI = private investmentG = government spendingX = exportsM = imports33National income, or Gross National Product is given by:a)GNP = Y = C + I + G + X + Mb)GNP = Y = C + I + G + X – Mc)GNP = I = C + Y + G + X – Md)GNP = Y = C + I + X + M – GAnswer: b)34Which of the following is a true statement?a)BCA ≡ X – Mb)BKA ≡ X – Mc)BKA –BCA ≡ X – Md)BKA ≡ X – MAnswer a)35There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for government expenditures. Thisrelationship is given by BCA ≡ X –M ≡ (S – I) + (T – G). Given this, which of thefollowing is a true statement?a)If (S –I) < 0, it implies that a country’s domestic savings is insufficient tofinance domestic investment.b)If (T –G) < 0, it implies that a country’s tax reven ue is insufficient to financegovernment spendingc)both a) and b) are trued)none of the aboveAnswer c)36There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for government expenditures. Thisrelationship is given by BCA ≡ X –M ≡ (S – I) + (T – G). Given this, which of thefollowing is a true statement?a)If (S –I) < 0, it implies that a country’s domestic savings is insufficient tofinance domestic investment.b)If (T – G) < 0, it implies that a country’s tax revenue is insufficient to financegovernment spendingc)when BCA is negative, it implies that government budget deficits an/or part ofdomestic investment are being finance with foreign-controlled capitald)all of the above are trueAnswer d)37There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for government expenditures. Thisrelationship is given by BCA ≡ X –M ≡ (S – I) + (T – G). Given this, in order for acountry to reduce a BCA deficit, which of the following must occur?a)For a given level of S and I, the government budget deficit (T – G) must bereducedb)For a given level of I and (T – G), S must be increasedc)For a given level of S and (T – G), I must falld)All of the above would work to reduce a BCA deficitAnswer d)Explain how each of the following transactions will be classified and recorded in the debit and credit of the U.S. balance of payments:(1) A Japanese insurance company purchases U.S. Treasury bonds and pays out of itsbank account kept in New York City.(2) A U.S. citizen consumes a meal at a restaurant in Paris and pays with her AmericanExpress card.(3) A Indian immigrant living in Los Angeles sends a check drawn on his L.A. bankaccount as a gift to his parents living in Bombay.(4) A U.S. computer programmer is hired by a British company for consultingand gets paid from the U.S. bank account maintained by the British company.In contrast to the U.S., Japan has realized continuous current account surpluses. Whatcould be the main causes for these surpluses? Is it desirable to have continuous current account surpluses?。

国际金融中英文版Chapter 2:Payments among NationsSingle-Choice QuestionsA country’s balance of payments records: 一个国家的国际收支平衡记录了 BThe value of all exports of goods and services from that country for a period of time.All flows of value between that country’s residents and residents of the rest of the world during a period of time.在一定时间段里,一个国家居民的资产和其它世界居民资产的流动All flows of financial assets that cross that country’s borders during a p eriod of time.All flows of goods into that country during a period of time.A credit item in the balance of payments is: 在国际收支平衡里的贷项是AAn item for which the country must be paid.一个国家必须收取的条款An item for which the country must pay.Any imported item.An item that creates a monetary claim owed to a foreigner.Every international exchange of value is entered into the balance-of-payments accounts __________ time(s). 每一次国际等价交换都记进国际收支帐户２次B1234A debit item in the balance of payments is: 在国际收支平衡中的借项是BAn item for which the country must be paid.An item for which the country must pay.一个国家必须支付的条款Any exported item.An item that creates a monetary claim on a foreigner.In a nation's balance of payments, which one of the following items is always recorded as a positive entry? D在国际收支中,下列哪个项目总被视为有利条项Changes in foreign currency reserves.Imports of goods and services.Military foreign aid supplied to allied nations.Purchases by foreign travelers visiting the country.国外游客在本国发生的购买The sum of all of the debit items in the balance of payments: 在收支平衡中,所有贷项的总和 BEquals the overall balance.Equals the sum of all credit items.等于所有借项的总和Equals the sum of credit items minus errors and omissions.Which of the following capital transactions are entered as debits in the U.S. balance of payments? 下列哪个资本交易在美国的收支平衡中当作借项？ BA U.S. resident transfers $100 from his account at Credit Suisse in Basel (Switzerland) to his account at a San Francisco branch of Wells Fargo Bank.A French resident transfers $100 from his account at Wells Fargo Bank in San Francisco to his Credit Suisse account in Basel.一个法国居民在旧金山的Fargo Bank用其帐户转帐１００美金到位于巴塞尔的瑞士信贷户口A U.S. resident sells his IBM stock to a French resident.A U.S. resident sells his Credit Suisse stock to a French resident.An increase in a nation's financial liabilities to foreign residents is a: 一个国家对另一个国家金融负债的增加是一种CReserve inflow.Reserve outflow.Capital inflow.资本流入Capital outflow.___A_______ are money-like assets that are held by governments and that are recognized by governments as fully acceptable for payments between them. 官方国际储备资产是一种类似于钱的资产，这种资产由政府掌握并作为政府间的一种支付手段得到充分认可.Official international reserve assets 官方国际储备资产Unofficial international reserve assetsOfficial domestic reserve assetsUnofficial domestic reserve assetsWhich of the following is considered a capital inflow? 下列哪项被视为资本流入 AA sale of U.S. financial assets to a foreign buyer.美国一金融资产卖给一外国买家A loan from a U.S. bank to a foreign borrower.A purchase of foreign financial assets by a U.S. buyer.A U.S. citizen’s repayment of a loan from a foreign bank.In a country’s balance of payments, which of the following transactions are debits?一个国家的收支平衡表中,哪个交易属于借项？ ADomestic bank balances owned by foreigners are decreased.外国人拥有的国内银行资产的下降Foreign bank balances owned by domestic residents are decreased.Assets owned by domestic residents are sold to nonresidents.Securities are sold by domestic residents to nonresidents.The role of ___D_______ is to d irect one nation’s savings into another nation’s investments: 资金流的作用是指导一个国家的储蓄进入到另一个国家的投资Merchandise trade flowsServices flowsCurrent account flowsCapital flows资金流Capital account.Current account.经常账目（户）Trade balance.Official reserve balance.The net value of flows of financial assets and similar claims (excluding official international reserve asset flows) is called the: 金融资产和类似的资产（官方国际储备资产流除外）的净值流叫AFinancial account.金融帐Current account.Trade balance.Official reserve balance.The financial account in the U.S. balance of payments includes: 美国国家收支表中的金融帐包括： BEverything in the current account.U.S. government payments to other countries for the use of military bases.美政府采用其它国家军事基地所需支付款项Profits that Nissan of America sends back to Japan.New U.S. investments in foreign countries.ＡU.S. resident increasing her holdings of a foreign financial asset causes a:一个美国居民增持一外国金融资产会引起DCredit in the U.S. current account.Debit in the U.S. current account.Credit in the U.S. capital account.Debit in the U.S. capital account.美国资本帐的借帐A foreign resident increasing her holdings of a U.S. financial asset causes a:一个美国居民增持本国一金融资产会引起 CCredit in the U.S. current account.Debit in the U.S. current account.Credit in the U.S. capital account.美国资本帐的贷帐Debit in the U.S. capital account.A deficit in the current account: 经常帐户中的赤字 ATends to cause a surplus in the financial account.会导致金融帐中的盈余Tends to cause a deficit in the financial account.Has no relationship to the financial account.Is the result of increasing exports and decreasing imports.In September, 2005, exports of goods from the U.S. decreased $3.3 billion to $73.4 billion, and imports of goods increased $3.8 billion to $144.5 billion. This increased the deficit in:20xx年8月,美国商品出口降低了33亿美元,共734亿美元；商品进口上升到1145亿美元,上长了38亿.这样增加了哪个方面的赤字？CThe balance of payments.The financial account.The current account.经常帐户Unilateral transfers.Which of the following would contribute to a U.S. current account surplus? 以下哪项有助于美国现金帐的盈余？ BThe United States makes a unilateral tariff reduction on imported goods.The United States cuts back on American military personnel stationed in Japan.美国削减在日本的军事人员U.S. tourists travel in large numbers to Asia.Which of the following transactions is recorded in the financial account?以下哪个交易会被当作金融帐AA Chinese businessman imports Ford automobiles from the United States.A U.S. tourist spends money on a trip to China.The New York Yankees are paid $10 million by the Chinese to play an exhibition game in Beijing, China.If a British business buys U.S. government securities, how will this be entered in the balance of payments? 如果一英国商人购买了美国政府的债券,那么这个交易在收支平衡表中会被当作是？ CIt will appear in the trade account as an import.It will appear in the trade account as an export.It will appear in the financial account as an increase in U.S. assets held by foreigners.会被当作是外国人所有的美国资产增长It will appear in the financial account as a decrease in U.S. assets held by foreigners.In the balance of payments, the statistical discrepancy or error term is used to: 在收支平衡表中, 统计差异与错误项目会用来确保借帐总和跟贷帐总和一致 AEnsure that the sum of all debits matches the sum of all credits.Ensure that imports equal the value of exports.Obtain an accurate account of a balance-of-payments deficit.Obtain an accurate account of a balance-of-payments surplus.Official reserve assets are: 官方储备资产是 BThe gold holdings in the nation’s central bank.Money like assets that are held by governments and that are recognized by governments as fully acceptable for payments between them. 官方国际储备资产是一种类似于钱的资产，这种资产由政府掌握并作为政府间的一种支付手段得到充分认可Government T-bills and T-bonds.Government holdings of SDR’sGold.Special Drawing Rights.IMF Reserve Positions.Foreign Currencies.外汇（币）The net accumulation of foreign assets minus foreign liabilities is: 海外净资产的积累减去外债等于CNet official reserves.Net domestic investment.Net foreign investment.国外投资净值Net foreign deficit.A country experiencing a current account surplus: 一个国家经历经常帐户的盈余 BNeeds to borrow internationally.Is able to lend internationally.就有能力向外放贷Must also have had a surplus in its "overall" balance.The ___C_______ measures the sum of the current account balance plus the private capital account balance. 官方结算差额是指经常帐户余额的总和加上私人资本帐（B=CA+FA,FA:为非官方投资和储备）Official capital balanceUnofficial capital balanceOfficial settlements balance官方结算差额Unofficial settlements balanceIf the overall balance is in __A________, there is an accumulation of official reserve assets by the country or a decrease in foreign official reserve holdings of the country's assets. 如果综合差额处于盈余，那么会出现本国官方储备资产的积累或者国外官方储备的减少（B=CA+FA,B+OR=0，OR:官方储备金额）Surplus盈余DeficitBalanceForeign handsWhich of the following is the current account balance NOT equal to? 以下哪项不等同于现金帐 DThe difference between domestic product and domestic expenditure.The difference between national saving and domestic investment.Net foreign investment.The difference between government saving and government investment. 政府储蓄与政府投资的差值True/False QuestionsCapital inflows are debits and capital outflows are credits. 资金流入是借项，资金外流是贷项The net flow of financial assets and similar claims is the private current account balance. 金融资产和类似的资产的净值叫经常帐目余额The majority of countries' official reserves assets are now foreign exchange assets, financial assets denominated in a foreign currency that is readily acceptable in international transactions. (T)大部份官方储备资产作为以外汇资产和金融资产为命名的外币在世界上交易与流通.A country's financial account balance equals the country's net foreign investment.一个国家的金融帐差额相当于一个国家的净国外投资A country has a current account deficit if it is saving more than it is investing domestically.一个国家如果在国内的储蓄比投资要大,那么会出现经常账目赤字The official settlements balance measures the sum of the capital account balance plus the public current account balance. 官方结算差额是资金帐户余额的总额加上公共经常帐户余额A nation's international investment position shows its stock of international assets and liabilities at a moment in time. (T)一个国家的国际投资状况反映出它在特定时间里的国际资产股份以及债务情况.A nation is a borrower if its current account is in deficit during a time period. (T)在一段时间内,如果一个国家的经常帐出现赤字,那么它就是借方.A nation is a debtor if its net stock of foreign assets is positive. 如果一个国家的国外资产净储备是正数,那么它是借方（债务方）A transaction leading to a foreign resident increasing her holdings of a U.S. financial asset will be recorded as a debit on the U.S. financial account.如果一项交易引起一外国居民增持美国金融资产的股份,那么这项交易在美国金融帐中会被当作借项A credit item is an item for which a country must pay. 贷项是指一个国家必须还款的条项Gold is a major reserve asset that is currently often used in official reserve transactions. 黄金作为主要的储备资产,常被用在官方储备交易当中.The current account balance is equal to the difference between domestic product and national expenditure.(T)经常项目余额等于国民生产与国民支出的差额In 2007 U.S. households, businesses and government were buying more goods and services than they were producing.(T)____年,美国家庭,商业,政府购买的商品和服务比他们生产（商品和服务）的要多.6。

国际金融中英文版Chapter 2:Payments among NationsSingle-Choice Questions1. A country’s balance of payments records：一个国家的国际收支平衡记录了 Ba.The value of all exports of goods and services from that country for a periodof time.b.All flows of value between that c ountry’s residents and residents of the restof the world during a period of time。

在一定时间段里，一个国家居民的资产和其它世界居民资产的流动c.All flows of financial assets that cross that country’s borders during a periodof time.d.All flows of goods into that country during a period of time。

2.3. A credit item in the balance of payments is: 在国际收支平衡里的贷项是 Aa.An item for which the country must be paid。

一个国家必须收取的条款b.An item for which the country must pay。

c.Any imported item。

d.An item that creates a monetary claim owed to a foreigner。

4.Every international exchange of value is entered into the balance—of—paymentsaccounts __________ time(s）。

Chapter 3The International Monetary SystemQuestions3-1. The Gold Standard and the Money Supply. Under the gold standard all national governments promised to follow the “rules of the game.” This meant defending a fixed exchange rate. What did this promise imply about a country’s money supply?A country’s money supply was limited to the amount of gold held by its central bank or treasury.For example, if a country had 1,000,000 ounces of gold and its fixed rate of exchange was100 local currency units per ounce of gold, that country could have 100,000,000 local currencyunits outstanding. Any change in its holdings of gold needed to be matched by a change in thenumber of local currency units outstanding.3-2. Causes of Devaluation. If a country follows a fixed exchange rate regime, what macroeconomic variables could cause the fixed exchange rate to be devalued?The following macroeconomic variables could cause the fixed exchange rate to be devalued:•An interest rate that is too low compared to other competing currencies• A continuing balance of payments deficit•An inflation rate consistently higher than in other countries.3-3. Fixed versus Flexible Exchange Rates. What are the advantages and disadvantages of fixed exchange rates?•Fixed rates provide stability in international prices for the conduct of trade. Stable prices aid in the growth of international trade and lessen risks for all businesses.•Fixed exchange rates are inherently anti-inflationary, requiring the country to follow restrictive monetary and fiscal policies. This restrictiveness, however, can often be a burden to a countrywishing to pursue policies that alleviate continuing internal economic problems, such as highunemployment or slow economic growth.•Fixed exchange rate regimes necessitate that central banks maintain large quantities of international reserves (hard currencies and gold) for use in the occasional defense of the fixedrate. As international currency markets have grown rapidly in size and volume, increasingreserve holdings has become a significant burden to many nations.•Fixed rates, once in place, may be maintained at rates that are inconsistent with economic fundamentals. As the structure of a nation’s economy changes, and as its trade relationshipsand balances evolve, the exchange rate itself should change. Flexible exchange rates allow thisto happen gradually and efficiently, but fixed rates must be changed administratively—usuallytoo late, too highly publicized, and at too large a one-time cost to the nation’s economic health.Chapter 3 The International Monetary System 13 3-4. The Impossible Trinity. Explain what is meant by the term impossible trinity and why it is true.•Countries with floating rate regimes can maintain monetary independence and financial integration but must sacrifice exchange rate stability.•Countries with tight control over capital inflows and outflows can retain their monetary independence and stable exchange rate, but surrender being integrated with the world’scapital markets.•Countries that maintain exchange rate stability by having fixed rates give up the ability to have an independent monetary policy.3-5. Currency Board or Dollarization. Fixed exchange rate regimes are sometimes implemented through a currency board (Hong Kong) or dollarization (Ecuador). What is the difference between the two approaches?In a currency board arrangement, the country issues its own currency but that currency is backed 100% by foreign exchange holdings of a hard foreign currency—usually the U.S. dollar.In dollarization, the country abolishes its own currency and uses a foreign currency, such asthe U.S. dollar, for all domestic transactions.3-6. Emerging Market Exchange Rate Regimes. High capital mobility is forcing emerging market nations to choose between free-floating regimes and currency board or dollarization regimes. What are the main outcomes of each of these regimes from the perspective of emerging market nations?There is no doubt that for many emerging markets a currency board, dollarization, and freely-floating exchange rate regimes are all extremes. In fact, many experts feel that the global financial marketplace will drive more and more emerging market nations towards one of these extremes. As illustrated by Exhibit 3.6 (in the chapter and reproduced here), there is a distinct lack of “middle ground” left between rigidly fixed and freely floating. In anecdotal support of this argument,a poll of the general population in Mexico in 1999 indicated that 9 out of 10 people would preferdollarization over a floating-rate peso. Clearly, there are many in the emerging markets of theworld who have little faith in their leadership and institutions to implement an effective exchange rate policy.14 Eiteman/Stonehill/Moffett •Multinational Business Finance, Twelfth Edition3-7. Argentine Currency Board. How did the Argentine currency board function from 1991 to January 2002 and why did it collapse?Argentina’s currency board exchange regime of fixing the value of its peso on a one-to-one basis with the U.S. dollar ended for several reasons.•As the U.S. dollar strengthened against other major world currencies, including the euro, during the 1990s, Argentine export prices rose vis-à-vis the currencies of its major trading partners.•This problem was aggravated by the devaluation of the Brazilian real in the late 1990s.•These two problems, in turn, led to continued trade deficits and a loss of foreign exchange reserves by the Argentine central bank. (4) This problem, in turn, led Argentine residents toflee from the peso and into the dollar, further worsening Argentina’s ability to maintain itsone-to-one peg.Euro.On January 4, 1999, eleven member states of the European Union initiated the3-8. TheEuropean Monetary Union (EMU) and established a single currency, the euro, which replacedthe individual currencies of participating member states. Describe three of the main ways thatthe euro affects the members of the EMU.The euro affects markets in three ways: (1) countries within the euro zone enjoy cheaper transaction costs; (2) currency risks and costs related to exchange rate uncertainty are reduced; and (3) allconsumers and businesses both inside and outside the euro zone enjoy price transparency andincreased price-based competition.The United Kingdom, Denmark, and Sweden have chosen not to adopt the euro but 3-9. Maveri c ks.rather maintain their individual currencies. What are the motivations of each of these three countries that are also members of the European Union?The United Kingdom chose not to adopt the euro because of the extensive use of the U.K. pound in international trade and financial transactions. London is still the world’s most importantfinancial center. The British are also very proud of their long tradition in financial matters when “Britannia ruled the waves.” They are afraid that monetary and financial matters may eventually migrate to Frankfurt where the European Central Bank is located. The British are also worriedabout continued concentration of decision making in Brussels where the main European Unioninstitutions are located.Denmark is also worried about losing its economic independence as a small country surrounded by big neighbors. Denmark’s currency, the krone, is mostly tied to the euro anyway, so it does not suffer a misalignment with the primary currency unit of the surrounding economies. Sweden has strong economic ties to Denmark, Norway, and the United Kingdom, none of which adopted the euro so far. Sweden, like the others, is afraid of over-concentration of power within EuropeanUnion institutions.Despite popular fears and a certain amount of nationalism, all three countries have strong forces within that would like these countries to adopt the euro. This would usually require popularreferendums, so you may see them adopt the euro in the future.Chapter 3 The International Monetary System 15 3-10. International Monetary Fund (IMF). The IMF was established by the Bretton Woods Agreement (1944). What were its original objectives?The IMF was established to render temporary assistance to member countries trying to defend the value of their currencies against cyclical, seasonal, or random occurrences. Additionally it was to assist countries having structural trade problems. More recently it has attempted to help countries, such as Russia, Brazil, Argentina, and Indonesia, to resolve financial crises.3-11. Special Drawing Rights. What are Special Drawing Rights?The Special Drawing Right (SDR) is an international reserve asset created by the IMF to supplement existing foreign exchange reserves. It serves as a unit of account for the IMF and other international and regional organizations and is also the base against which some countries peg the exchangerate for their currencies.Defined initially in terms of a fixed quantity of gold, the SDR has been redefined several times.It is currently the weighted value of currencies of the five IMF members having the largest exports of goods and services. Individual countries hold SDRs in the form of deposits in the IMF. These holdings are part of each country’s international monetary reserves, along with official holdings of gold, foreign exchange, and its reserve position at the IMF. Members may settle transactionsamong themselves by transferring SDRs.3-12. Exchange Rate Regime Classifications. The IMF classifies all exchange rate regimes into eight specific categories that are summarized in this chapter. Under which exchange rate regime would you classify each of the following countries?a. France: Exchange arrangements with no separate legal tender.b. The United States: independent floating.c. Japan: independent floating.d. Thailand: managed floating with no pre-announced path for the exchange rate. Prior to theAsian Crisis of 1997 it was tied to the U.S. dollar.3-13. The Ideal Currency. What are the attributes of the ideal currency?If the ideal currency existed in today’s world, it would possess three attributes (illustrated inExhibit 3.4), often referred to as The Impossible Trinity.a.Exchange rate stability. The value of the currency would be fixed in relationship to othermajor currencies so traders and investors could be relatively certain of the foreign exchangevalue of each currency in the present and into the near future.b. Full financial integration. Complete freedom of monetary flows would be allowed, so tradersand investors could willingly and easily move funds from one country and currency to anotherin response to perceived economic opportunities or risks.c. Monetary independen c e. Domestic monetary and interest rate policies would be set by eachindividual country to pursue desired national economic policies, especially as they mightrelate to limiting inflation, combating recessions, and fostering prosperity and full employment.The reason that it is termed The Impossible Trinity is that a country must give up one of the three goals described by the sides of the triangle, monetary independence, exchange rate stability, orfull financial integration. The forces of economics do not allow the simultaneous achievement of all three.16 Eiteman/Stonehill/Moffett •Multinational Business Finance, Twelfth Edition3-14. Bretton Woods Failure. Why did the fixed exchange rate regime of 1945–1973 eventually fail?The fixed exchange rate regime of 1945–1973 failed because of widely diverging nationalmonetary and fiscal policies, differential rates of inflation, and various unexpected externalshocks. The U.S. dollar was the main reserve currency held by central banks and was the key to the web of exchange rate values. The United States ran persistent and growing deficits in itsbalance of payments, which required a heavy outflow of dollars to finance the deficits. Eventually the heavy overhang of dollars held by foreigners forced the United States to devalue the dollarbecause the United States was no longer able to guarantee conversion of dollars into its diminishing store of gold.3-15. EU and Euro Expansion. With so many new countries joining the European Union in 2004, when will they officially move to the euro—if ever?In January 2007 two more countries were added to the EU’s growing membership—Bulgaria and Romania. Their entry was little more than two years after the EU had added 10 more countriesto its ranks. As illustrated by Global Finance in Practice 3.2, to date only one of these new12 members has actually adopted the euro. Although all members are expected to eventuallyreplace their currencies with the euro, recent years have seen growing debates and continualpostponements by the new members in moving toward full euro adoption.。

Chapter1 balance of paymentsBalance of Payments Accounting1Balance of paymentsa)is defined as the statistical record of a country’s internationaltransactions over a certain period of time presented in the form ofa double-entry bookkeepingb)provides detailed information concerning the demand and supply of acountry’s currencyc)can be used to evaluate the performance of a country in internationaleconomic competitiond)all of the aboveAnswer: d2Generally speaking, any transaction that results in a receipt from foreignersa)Will be recorded as a debit, with a negative sign, in the . balanceof paymentsb)Will be recorded as a debit, with a positive sign, in the . balanceof paymentsc)Will be recorded as a credit, with a negative sign, in the . balanceof paymentsd)Will be recorded as a credit, with a positive sign, in the . balanceof paymentsAnswer d3 Generally speaking, any transaction that results in a payment to foreignerse)Will be recorded as a debit, with a negative sign, in the . balanceof paymentsf)Will be recorded as a debit, with a positive sign, in the . balanceof paymentsg)Will be recorded as a credit, with a negative sign, in the . balanceof paymentsh)Will be recorded as a credit, with a positive sign, in the . balanceof paymentsAnswer a)4 Suppose the McDonalds Corporation imports 100 tons of Canadian beef, paying for it by transferring the funds to a New York bank account kept by the Canadian Beef Conglomerate.i)Payment by McDonalds will be recorded as a debitj)The deposit of the funds by the seller will be recorded as a debit k)Payment by McDonalds will be recorded as a creditl)The deposit of the funds by the buyer will be creditAnswer: a5Since the balance of payments is presented as a system of double-entry bookkeeping,a)Every credit in the account is balanced by a matching debitb)Every debit in the account is balanced by a matching creditc)a) and b) are both trued)None of the aboveAnswer c)6 A country’s international transactions can be grouped into thefollowing three main types:a)current account, medium term account, and long term capitalaccountb)current account, long term capital account, and official reserveaccountc)current account, capital account, and official reserve accountd)capital account, official reserve account, trade account Answer: c7Invisible trade refers to:a)services that avoid tax paymentsb)underground economyc)legal, consulting, and engineering servicesd)tourist expenditures, onlyAnswer: c8The current account is divided into four finer categories:a)Merchandise trade, services, income, and statisticaldiscrepancy.b)Merchandise trade, services, income, and unilateral transfersc)Merchandise trade, services, portfolio investment, andunilateral transfersd)Merchandise trade, services, factor income, and directinvestmentAnswer: b9Factor incomea)Consists largely of interest, dividends, and other income onforeign investments.b)Is a theoretical construct of the factors of production, land,labor, capital, and entrepreneurial ability.c)Is generally a very minor part of national income accounting,smaller than the statistical discrepancy.d)None of the aboveAnswer: aUSE THE FOLLOWING INFORMATION TO ANSWER THE NEXT TWO QUESTIONS10 The entries in the “current account” and the “capital account”, combined together, can be outlined (in alphabetic order) as:(i)- direct investment (ii)- factor income (v)- other capital(vi)- portfolio(iii)- merchandise(iv)- official transfer investment(vii)- private transfer (viii)- services11Current account includesa)(i), (ii), and (iii)b)(ii), (iii), and (vii)c)(iv), (v), and (vii)d)(i), (v), and (vi)Answer: b12Capital account includesa)(i), (ii), and (iii)b)(ii), (iii), and (vii)c)(iv), (v), and (vii)d)(i), (v), and (vi)Answer: d13The difference between Foreign Direct Investment and Portfolio Investment is that:a)Portfolio Investment mostly represents the sale and purchase offoreign financial assets such as stocks and bonds that do not involvea transfer of control.b)Foreign Direct Investment mostly represents the sale and purchase offoreign financial assets such as stocks whereas Portfolio Investmentmostly involves the sales and purchase of foreign bonds.c)Foreign direct investment is about buying land and building factories,whereas portfolio investment is about buying stocks and bonds.d)All of the aboveAnswer: a14In the latter half of the 1980s, with a strong yen, Japanese firmsa)Faced difficulty exportingb)Could better afford to acquire . assets that had become less expensivein terms of yen.c)Financed a sharp increase in Japanese FDI in the United Statesd)All of the aboveAnswer: d15International portfolio investments have boomed in recent years, as a result ofa)A depreciating . dollarb)Increased gasoline and other commodity prices.c)The general relaxation of capital controls and regulation in manycountriesd)None of the aboveAnswer: cAnswer: c)16The capital account measuresa)The sum of . sales of assets to foreigners and . purchases of foreignassets.b)The difference between . sales of assets to foreigners and . purchasesof foreign assets.c)The difference between . sales of manufactured goods to foreignersand . purchases of foreign products.d)None of the aboveAnswer: b) page 6417When Honda, a Japanese auto maker, built a factory in Ohio,a)It was engaged in foreign direct investmentb)It was engaged in portfolio investmentc)It was engaged in a cross-border acquisitiond)None of the above.Answer: a) page 64.18The capital account may be divided into three categories:a)Cross-border mergers and acquisitions, portfolio investment, andother investmentb)Direct investment, portfolio investment, and Cross-border mergersand acquisitionsc)Direct investment, mergers and acquisitions, and other investmentd)Direct investment, portfolio investment, and other investment Answer: d)19When Nestlé, a Swiss firm, bought the American firm Carna tion, it was engaged in foreign direct investment. If Nestlé had only bought a non-controlling number of shares of the firma)Nestlé would have been engaged in portfolio investmentb)Nestlé would have been engaged in a cross-border acquisitionc)It would depend if they bought the shares from an American or aCanadiand)None of the above.Answer: a)20Foreign direct investment (FDI) occursa)when an investor acquires a measure of control of a foreign businessb)when there is an acquisition, by a foreign entity in the ., of 10percent or more of the voting shares of a businessc)with sales and purchases of foreign stocks and bonds that do notinvolve a transfer of controld)a and bAnswer: d21Statistical discrepancy, which by definition represents errors and omissionsa)Cannot be calculated directlyb)Is calculated by taking into account the balance-of-payments identityc)Probably has some elements that are honest mistakes, it can’t allbe money laundering and drugs.d)All of the aboveAnswer: d)22The statistical discrepancy in the balance-of-payments accountsa)Arise since recordings of payments and receipts are done at differenttimes, in different places, possibly using different methods.b)Arise since some transactions (illegal transactions?) occur “off thebooks”.c)Represents omitted and misrecorded transactions.d)All of the aboveAnswer: d)23Regarding the statistical discrepancy in the balance-of-payments accountsa)There is some evidence that financial transactions may be mainlyresponsible for the discrepancy.b)The sum of the balance on the capital account and the statisticaldiscrepancy is very close to the balance of the current account inmagnitude.c)It tends to be positive one year and negative in others, so it’s safeto ignore itd)a) and b)Answer: d)24When a country must make a net payment to foreigners because of a balance-of-payments deficit, the central bank of the countrya)Should do nothingb)Should run down its official reserve assets . gold, foreign exchanges,and SDRs)c)Should borrow anew from foreign central banks.d)b) or c) will workAnswer: d)25Continued . trade deficits coupled with foreigners’ desire to diversify their currency holdings away from . dollarsa)could further diminish the position of the dollar as the dominantreserve currencyb)could affect the value of . dollar . through the currencydiversification decisions of Asian central banks)c)Could lend steam to the emergence of the euro as a credible reservecurrencyd)All of the aboveAnswer: d26Currently, international reserve assets are comprised ofa)gold, platinum, foreign exchanges, and special drawing rights (SDRs)b)gold, foreign exchanges, special drawing rights (SDRs), and reservepositions in the International Monetary Fund (IMF)c)gold, diamonds, foreign exchanges, and special drawing rights (SDRs)d)reserve positions in the International Monetary Fund (IMF), only Answer: b27International reserve assets include “foreign exchanges”. These area)Special Drawing Rights (SDRs) at the IMFb)reserve positions in the International Monetary Fund (IMF)c)Foreign currency held by a country’s c entral bankd)None of the aboveAnswer: c28The most important international reserve asset, comprising 94 percent of the total reserve assets held by IMF member countries isa)Goldb)Foreign exchangesc)Special Drawing Rights (SDRs)d)Reserve positions in the International Monetary Fund (IMF) Answer: b29The vast majority of the foreign-exchange reserves held by central banks are denominated ina)Local currenciesb). dollarsc)Yend)EuroAnswer: b30The . Trade Deficita)Is a capital account surplusb)Is a current account deficitc)Is both a capital account surplus and a current account deficitd)None of the aboveAnswer: c31Over the last several years the . has run persistenta)Balance-of-payments deficitsb)Balance-of-payments surplusesc)Current Account deficitsd)Capital Account deficitsAnswer: c32More important than he absolute size of a country’s balance-of-payments disequilibriuma)is the nature and cause of the disequilibriumb)is whether it is a trade surplus or deficitc)is whether the local government is mercantilist or notd)Nothing is more important than he absolute size of a country’sbalance-of-payments disequilibriumAnswer: aThe Relationship between Balance of Payments and National Income Accounting For questions in this section, the notation isY = GNP = national incomeC = consumptionI = private investmentG = government spendingX = exportsM = imports33National income, or Gross National Product is given by:a)GNP = Y = C + I + G + X + Mb)GNP = Y = C + I + G + X – Mc)GNP = I = C + Y + G + X – Md)GNP = Y = C + I + X + M – GAnswer: b)34Which of the following is a true statement?a)BCA ≡ X – Mb)BKA ≡ X – Mc)BKA –BCA ≡ X – Md)BKA ≡ X – MAnswer a)35There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for governmentexpenditures. This relationship is given by BCA ≡ X –M ≡ (S – I) + (T – G). Given this, which of the following is a true statement?a)If (S –I) < 0, it implies that a country’s domestic savings isinsufficient to finance domestic investment.b) If (T – G) < 0, it implies that a country’s tax revenue isinsufficient to finance government spendingc)both a) and b) are trued)none of the aboveAnswer c)36There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for governmentexpenditures. This relationship is given by BCA ≡ X –M ≡ (S – I) + (T – G). Given this, which of the following is a true statement?a)If (S –I) < 0, it implies that a country’s domestic savings isinsufficient to finance domestic investment.b) If (T –G) < 0, it implies that a country’s tax revenue isinsufficient to finance government spendingc)when BCA is negative, it implies that government budget deficits an/orpart of domestic investment are being finance withforeign-controlled capitald)all of the above are trueAnswer d)37There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for governmentexpenditures. This relationship is given by BCA ≡ X –M ≡ (S – I)+ (T – G). Given this, in order for a country to reduce a BCA deficit,which of the following must occur?a)For a given level of S and I, the government budget deficit (T – G)must be reducedb)For a given level of I and (T – G), S must be increasedc)For a given level of S and (T – G), I must falld)All of the above would work to reduce a BCA deficitAnswer d)Explain how each of the following transactions will be classified and recorded in the debit and credit of the . balance of payments:(1) A Japanese insurance company purchases . Treasury bonds and pays outof its bank account kept in New York City.(2) A . citizen consumes a meal at a restaurant in Paris and pays with herAmerican Express card.(3) A Indian immigrant living in Los Angeles sends a check drawn on his .bank account as a gift to his parents living in Bombay.(4) A . computer programmer is hired by a British company forconsulting and gets paid from the . bank account maintained by theBritish company.In contrast to the ., Japan has realized continuous current account surpluses.What could be the main causes for these surpluses? Is it desirable to have continuous current account surpluses?。

《实用国际金融英语》参考答案Chapter 1Lead-in Activities1. Balance of payment data serve as record of the flows of goods, services and finance between an economy and the rest of the world. As one of the primary functions of the IMF is to prevent financial crises and assist countries in balance of payment difficulties, the collection of standardized, comparable balance of payment data is seen as a core task.BOP is a statistical statement that summarizes, for a specific period (typically a year or quarter), the economic transactions of an economy with the rest of the world. It covers:·All the goods, services, factor income and current transfers an economy receives from or provides to the rest of the world;·Capital transfers and changes in an economy’s external financial claims and liabilities.2. When a country has a surplus in its current account, i.e. when its exports exceed its imports, there will probably be a surplus in the balance of payment because the current account forms a very large proportion in the balance of payment. The surplus means the supply of foreign exchange exceeds demand. The monetary authority has to increase the purchase of the foreign currency and the stock of its international reserve. Meanwhile, the supply of domestic currency adds at an accelerated speed, which may lead to further issue of the local currency and cause inflation.3. When there is a long-lasting surplus in the balance of payment, particularly in the current account, there will also be excessive demand for its currency. The country’s exchange rate will rise, unless the central bank is willing to provide its currency to the market in exchange for foreign currencies. For example, when the export of the United States exceeds much more than import, a large quantity of US dollars are wanted by those importers to pay for the US goods. Thus, the exchange rate of US dollars rises.When the balance of payment has a long-lasting deficit, the payable debts denominated in foreign currencies are more than receivable claims; there will be a considerable demand for foreign currencies over the supply. As a result, the foreign currencies wanted appreciate, and the domestic one devalues.4.Temporary drop of surplus or moderate short-term deficit does not seriously affect a country’s economy or foreign trade. On one hand, deficit means larger amount of import than export in current account; on the other hand, it more likely shows an increasing demand of foreign currencies to pay for the imported goods. In other words, deficit may cause the raise of exchange rate of foreign hard currencies, which is conducive to the investors from the issuing countries of these appreciating currencies. This is surely good news to those that are in need of foreign investment. Temporary drop of surplus helps cool off the national economy and serves as a brake stopping ongoing inflation.5.The stock of international reserve should be neither more or less than necessary. The International Exchange Reserves are kept in the debit entry in BOP statements in that the monetary authority has to pay in exchange for the foreign hard currencies. Therefore, the amount and composition of exchange reserves are to be decided by taking the following factors into consideration.(1) The duration of the government’s external debt should be related to the duration of thereserves, with emphasis on the interest rate exposure risk.(2) High-risk-return assets should be limited within a safe range.(3) One of the most important issues raised in the context of investing the reserves of a centralbank is the choice of a reference basket.It is well recognized that the lowest level of the stock of international reserve should be no less than the amount payable for a 3-month import. And, the stronger an economy is, the less international reserve is to be kept.6. C7. CExercisesI. True or False1. F2. F3. F4. F5. F6. F7. F8. F9. F 10. F11. F 12. T 13. F 14. F 15. TII．Translation Task1.在与国际货币基金组织的技术援助使团于2000年上半年进行了磋商之后，国家外汇管理局吸取了国际通行的经验，以提高其国际收支报告的及时性。

国际金融中英文版Chapter 2:Payments among NationsSingle-Choice Questions1. A country’s balance of payments records：一个国家的国际收支平衡记录了 Ba.The value of all exports of goods and services from that country for a periodof time.b.All flows of value between that c ountry’s residents and residents of the restof the world during a period of time。

在一定时间段里，一个国家居民的资产和其它世界居民资产的流动c.All flows of financial assets that cross that country’s borders during a periodof time.d.All flows of goods into that country during a period of time。

2.3. A credit item in the balance of payments is: 在国际收支平衡里的贷项是 Aa.An item for which the country must be paid。

一个国家必须收取的条款b.An item for which the country must pay。

c.Any imported item。

d.An item that creates a monetary claim owed to a foreigner。

4.Every international exchange of value is entered into the balance—of—paymentsaccounts __________ time(s）。