Part 1 One-Choice Questions 1. Which of the following is NOT included in the balance of payments? ( ) A the capital account B the current account C the financial account D the government budget account 2. A trade deficit indicates that ). A a country imports less than it exports B a country imports more than it exports C a country's imports equals its exports D a country's trade has increased on average 3. An example of foreign direct investment is A a U.S. investor buying stock in a British firm. B a U.S. investor buying a Canadian bond. C a U.S. firm buying an Australian government bond. D GM building a factory in Korea. 4. Which statement about the risks of bond investing is FALSE ) A A bond issuer might not be able to pay the interest or the principal as stated in a bond. B Market interest rate might change after the purchase of a bond. C High-quality corporate bonds are called gilt-edged bonds. D Holding unsecured corporate bond will take greater risks in the future than holding secured corporate bond. 5. If an American has a commitment to pay a friend in Britain 1,000 pounds in 30 days, he could remove the risk of loss due to the appreciation of the pound by:( A Buying dollars in the forward market for delivery in 30 days B Selling dollars in the forward market for delivery in 30 days C Buying the pounds in the forward market for delivery in 30 days D Selling the pounds in the forward market for delivery in 30 days 6. All else equal, depreciation of the Mexican peso relative to the U.S. dollar would make a trip by:( ). A an American to Mexico less expensive B a Mexican to the United States less expensive Can American to Mexico more expensive Dan Australian to the United States more expensive