DIŞ TİCARET - Deneme Sınavı - 3

The Purchasing Power Theory based on the law of one price investigates the relationship between the prices of not only the identical goods but also the prices of all goods among countries, which are measured by the general price levels.

Spot exchange rate is the current exchange rate today for immediate delivery.

There are four basic groups (accounts) summarizing a nation’s balance of payments: current account, capital account, financial account and reserve assets. There is an additional balancing item known as statistical discrepancy. The correct answer is E.

The account that involves all credit and debit items arising from export and import transactions of all goods and services, income receipt, and payment transactions in the country is the current account. The correct answer is A.

Direct investments (or its widely used name, Foreign Direct Investments – FDI) are the financial flows that stem from ownership transferring of a foreign company or lending to a foreign company that is widely controlled by the investor. The correct answer is B.

Net foreign investments in a country are measured by subtracting the increase in financial liabilities from the increase in financial assets. This value is also equal to current account balance. The correct answer is D.

The international capital movements or flows are defined as movements or flows of financial resources from one country to others to eliminate the disequilibrium in the balance of payments or to improve the country’s production possibilities. The correct answer is C.

In the post-World War II period, capital flows from developed countries to developing countries have increased significantly. Behind this increase, it is accepted that there are factors such as the growth of multinational companies, expansion of intergovernmental loans and the increase of the efficiency of international organizations (like the IMF, the World Bank and the International Finance Corporation). The correct answer is E.

Short term capital flows generally do not come to a country to utilize its economic development potential; they generally move into a country to benefit the high return possibilities in financial assets and to obtain extra profit by using interest rate-foreign exchange rate arbitrage. Therefore, it is possible to say that this type of capital flows is largely speculative. The correct answer is A.

If we prepare a list that compiles the importance of foreign direct investments, it should contain the followings:

The correct answer is C.

Most of the countries promote to attract direct investments since they have some important positive effects on the balance of payments, capital accumulation, economic growth, and employment. The correct answer is D.

A foreign exchange (or a foreign exchange rate) crisis occurs when there is an unexpected and sudden collapse of domestic currency unit (high level of depreciation in the flexible exchange rate regime or high level of devaluation in the fixed exchange rate regime). The correct answer is B.

we all know that a large part of international transactions consists of financial assets (like bonds, equities, deposits and loans), trade and currency exchange in a modern world.

There are four basic groups (accounts) summarizing a nation’s balance of payments: Current account, capital account, financial account and reserve assets. There is an additional balancing item known as statistical discrepancy.

Capital Account: This account fundamentally consists of unilateral transfers occurred in the country with the rest of the world. Since unilateral transfers express unrequited payments among nations, in this account, generally donations a country makes and receives are recorded.

countries like Britain, United States, Canada and Australia has been realized on a large scale by the advantages of international capital. The one hundred-year period before the First World War is generally known as the golden age of private investments.

The most important development between the two world wars is that the United States has turned into a net international creditor country from the net international debtor position. Great Depression of 1929 caused a sharp decline in foreign trade and international capital movements because of the chaos in international payments, tariffs and restrictions on international trade and foreign exchange.

Funds used for investments made by a country’s own citizens in a foreign country are called as domestic capital while the funds used for foreign investments in a country are foreign capital.

As we already noted long term capital movements may be classified as direct investments (also called as foreign direct investments and known by the abbreviation FDI) and portfolio investments (also called as foreign portfolio investments and known by the abbreviation FPI).

See figure 8.3 Worldwide Foreign Direct Investments (% of World GDP) on page 213