The capital-service account is the section of the account that records the a. Current; income paid to foreign owners of assets in Canada and income received by Canadians for assets located abroad. O b. Capitalt; the foreign-exchange reserves held by the Bank of Canada. O c. Current; the interest charges and earnings of Canadian importers and exporters. O d. Current; the financial reserves held by the Bank of Canada which they can use in the foreign-exchange market. e. Capital; the net change in Canadian investments abroad and the net change in foreign investments in Canada.

The capital-service account is the section of the account that records the a. Current; income paid to foreign owners of assets in Canada and income received by Canadians for assets located abroad. O b. Capitalt; the foreign-exchange reserves held by the Bank of Canada. O c. Current; the interest charges and earnings of Canadian importers and exporters. O d. Current; the financial reserves held by the Bank of Canada which they can use in the foreign-exchange market. e. Capital; the net change in Canadian investments abroad and the net change in foreign investments in Canada.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A 216.
QUESTION 15 The foreign exchange market is characterized by O volatility under floating exchange rates O highly integrated markets between countries O high trading volume O low spreads between buying and selling rates. O all of the above
In August 2015 investor sentiment shifted against the Chinese yuan. Investors sold the yuan and bought dollars, as financial capital flowed out of China, seeking better rates of return in other countries. What actions did China take in response to this situation? O China used $1 trillion of its foreign exchange reserves to purchase the yuan in an attempt to prevent further devaluation and tightened capital controls on financial outflows. O China loosened capital controls to encourage forcign investment into the Chinese economy. O China sold the yuan to encourage further depreciation in an attempt to improve its trade deficit. China's monetary authority sold tie yuan in an attempt to orevent fürther devaluation and raised interest rates to stem the outflow of forcige capital.
6. Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this is known as _____________ whereas ___________ are expressed as dollars per foreign unit. a. European terms; indirect b. American terms; direct c. American terms; European terms d. European terms; American terms
A strong U.S. dollar means that U.S. goods exported abroad will cost: O A. less in foreign countries and foreign goods imported will cost less in the United States. B. less in foreign countries and foreign goods imported will cost more in the United States. C. more in foreign countries and foreign goods imported will cost more in the United States. D. more in foreign countries and foreign goods imported will cost less in the United States.
Suppose that the price of the three-month forward pound is $1.97. Will a U.S. investor benefit from covered interest arbitrage? (Hint: The three- 1.5%.) month U.K. interest rate is 10% = 2.5%, and the three-month U.S. interest rate is No, because there will be a loss of 2%. O Yes, the investor will benefit by 4%. O No, because there will be a loss of 3%. O No, because there will be a loss of 4%.
15. Which of the given statements concerning the market for foreign currency exchange is true? a. An increase in Canadian net capital outflow increases the supply of Canadian dollars and the Canadian dollar appreciates. b. An increase in Canadian net capital outflow increases the demand for Canadian dollars and the Canadian dollar appreciates. c. An increase in Canadian net capital outflow increases the demand for Canadian dollars and the Canadian dollar depreciates. d. An increase in Canadian net capital outflow increases the supply of Canadian dollars and the Canadian dollar depreciates. e. None of the above.
Basic balance in balance of payments refers to Select one: O a the total balance of current account and balances on long term items in capital account. O b. None of these c. the balance of payments on current account O d. the balance in the official reserves account O e. the combined balance of current and capital accounts
If the government wants to O decrease; contractionary O increase; expansionary O increase; only rules-based O decrease: expansionary the value of its currency in the foreign exchange market, it can use monetary policy.
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