Highlight the correct option for the following questions

31.

When a firm expands in the production process to supply its own raw materials and intermediate products or to provide its own sales or distribution network, the process is called:

A. Horizontal merger.

B. Risk diversification.

C. Vertical integration.

D. Horizontal integration.

32.

Which of the following is an example of a capital inflow for the US?

A. A domestic decrease of assets held by foreign investors.

B. A reduction in US foreign assets holdings.

C. An increase in US foreign asset holdings.

D. Importation of goods and services.

33.

If a US resident were to visit Japan and spend $500 on food and shelter, what entries would be made into the US balance of payments?

A. Travel services - credit of $500; Capital inflow - debit of $500.

B. Accounts payable - debit of $500; Goods imports - credit of $500.

C. Travel services - debit of $500; Capital inflow - credit of $500.

D. Accounts payable - credit of $500; Inventory - debit of $500.

34.

If a US resident purchases a foreign stock for $900 and pays for it by increasing foreign bank balances in the US, what entries would be made in the US balance of payments?

A. Common stock - credit of $900; Cash - debit of $900.

B. Capital outflow - credit of $900; Capital inflow debit of $900.

C. Common stock - debit of $900; Cash - credit of $900.

D. Capital outflow - debit of $900; Capital inflow - credit of $900.

35.

Which of the following is not included in the current account?

A. Currently produced goods and services.

B. Income on foreign investment.

C. Unilateral transfers.

D. Direct foreign investment.

36.

____________ are balance of payments transactions involving the receipt of payments from foreigners.

A. Debit transactions.

B. Credit transactions.

C. Accommodating transactions.

D. Autonomous transactions.

37.

US military aid granted to foreign countries is entered in the:

A. Merchandise trade account.

B. Capital account.

C. Current account.

D. Official settlement account.

38.

Individuals, firms, and banks buy and sell foreign currencies in the:

A. Foreign exchange market.

B. Currency market.

C. Eurocurrency market.

D. Export-Import bank.

39.

A television costs 600 Canadian dollars (CAD) in Canada and 500 US dollars (USD) in the US. The exchange rate between the Canadian dollar and the US dollar is:

A. 1.2 CAD per 1 USD.

B. 1.2 USD per 1 CAD.

C. 0.833 CAD per 1 USD.

D. Cannot determine.

40.

The act of purchasing currency in one market at a lower price for immediate resale in another market at a higher price in order to make a profit is called:

A. Arbitrage.

B. Hedging.

C. Speculation.

D. Interest arbitrage.