QUESTION: 1249

Under a flexible exchange rate system, a nation that offers more attractive investment opportunities than its trading partners can expect to run a

balance of merchandise trade surplus.
deficit on its capital account transactions.
surplus on current account transactions.
deficit on current account transactions.

Answer(s): D

Explanation:

Since a high yield on investments will attract capital, the nation will run a capital account surplus which must be offset by a current account deficit.

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QUESTION: 1250

According to the method for calculating short-term interest rates from annualized rates, a three-month interest rate of 4% means that the interest rate paid after three months will be ________.

.25%
1%
2%
4%
none of these answers

Answer(s): B

Explanation:

The rate to be paid over the period is equal to the annual rate multiplied by the length of the period, as a proportion of a year. Thus: 4%(3/12) = 1%.

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QUESTION: 1251

If you are about to go to Brazil and would like to obtain Brazilian currency, this acquisition would be accomplished in the

internal affairs office.
Office of the U.S. Treasury.
Federal Reserve market.
export/import market.
foreign exchange market.

Answer(s): E

Explanation:

The foreign exchange market is the market in which the currencies of different countries are bought and sold.
Thus, in order to exchange your dollars for cruzeiros you must access the foreign exchange market.

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QUESTION: 1252

The inevitable consequence of price controls is:

increased currency convertibility.
none of these answers.
the development of black markets.
trade war.

Answer(s): C

Explanation:

Since price controls, of which exchange rate control are a type, lead to shortages, black markets develop.

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Free CFA-Level-I Exam Braindumps (page: 313)

QUESTION: 1249

Explanation:

QUESTION: 1250

Explanation:

QUESTION: 1251

Explanation:

QUESTION: 1252

Explanation: