Portugal currently has a balance of trade deficit with Country X. When a firm in
ID: 2638116 • Letter: P
Question
Portugal currently has a balance of trade deficit with Country X. When a firm in Country X manufactures a product that is almost identical to the original product produced in Portugal and other countries, this:
increases Portugal's capital account deficit
decreases Portugal's capital account deficit
increases the balance of trade deficit with Country X
decreases the balance of trade deficit with Country X
none of the above
A British MNC believes that the U.S. dollar is going to depreciate significantly in the near future. It has payables of $1 million due in 60 days. If the MNC is correct that the dollar will depreciate, a good strategy is to:
sell dollars forward
purchase dollars forward
purchase dollar currency call options
remain unhedged
none of the above
A Belgian company purchases materials from a company in the U.S. for 1.5 million euros. It receives revenues from the U.S. of 2 million euros. The Belgian company:
would be unaffected by a stronger dollar
has high transaction exposure
has high economic exposure
has high translation exposure
none of the above
Explanation / Answer
1. increases the balance of trade deficit with Country X
2. sell dollars forward
3. would be unaffected by a stronger dollar