MEcon Master of Economics International Trade and Finance 2

Question 1

Which international institution was established to provide balance-of-payments support and promote exchange rate stability?

Accepted Answer

IMF

Answer

World Bank

Answer

WTO

Answer

UNCTAD

Question 2

The J-curve effect in international trade describes how:

Accepted Answer

The trade balance worsens before improving after currency depreciation

Answer

Exports rise immediately after a tariff

Answer

GDP growth accelerates after trade liberalization

Answer

Foreign direct investment follows a J-shaped path

Question 3

Purchasing Power Parity (PPP) theory predicts that the exchange rate between two currencies will equal:

Accepted Answer

The ratio of their price levels

Answer

The ratio of their interest rates

Answer

The ratio of their GDP growth rates

Answer

The ratio of their trade balances

Question 4

Foreign Direct Investment (FDI) differs from portfolio investment primarily because FDI involves:

Accepted Answer

Controlling ownership interest in a foreign enterprise

Answer

Only bond purchases

Answer

Short-term currency speculation

Answer

Government-to-government lending

Question 5

A country running a current account deficit must be running a:

Accepted Answer

Capital and financial account surplus

Answer

Budget deficit

Answer

Trade surplus

Answer

Monetary surplus

Question 6

The 'terms of trade' refers to:

Accepted Answer

The ratio of a country's export prices to its import prices

Answer

The legal terms in bilateral trade agreements

Answer

The average tariff rate applied to trade partners

Answer

The volume of goods exchanged in bilateral trade