Question 1

The sum of all of the debit items in the balance of payments:

Accepted Answer

A) equals the overall balance. 
B) equals the sum of all credit items. 
C) equals 'compensating' transactions. 
D) equals the errors and omissions. 
A) equals the overall balance. 
B) equals the sum of all credit items. 
C) equals 'compensating' transactions. 
D) equals the errors and omissions.

Question 2

The current account balance of the balance of payments account equals:

Accepted Answer

A) the sum of national savings and domestic capital formation. 
B) net foreign investment. 
C) the domestic production of goods and services. 
D) net credits minus debits involving changes in nonofficial foreign financial assets and liabilities. 
A) the sum of national savings and domestic capital formation. 
B) net foreign investment. 
C) the domestic production of goods and services. 
D) net credits minus debits involving changes in nonofficial foreign financial assets and liabilities.

Question 3

A nation is called a lender if:

Accepted Answer

A) its financial account is in deficit during a time period. 
B) its current account is in surplus during a time period. 
C) its current account is in deficit during a time period. 
D) its net stock of foreign assets is positive. 
A) its financial account is in deficit during a time period. 
B) its current account is in surplus during a time period. 
C) its current account is in deficit during a time period. 
D) its net stock of foreign assets is positive.

Question 4

A country's balance of payments records:

Accepted Answer

A) the prices that a country pays for its imports and the prices that the country receives for its imports. 
B) the flows of value between that country's residents and residents of the rest of the world during a period of time. 
C) capital gains and losses on a country's international assets. 
D) the value of a country's holdings of foreign assets, minus the value of foreign holdings of the country's assets. 
A) the prices that a country pays for its imports and the prices that the country receives for its imports. 
B) the flows of value between that country's residents and residents of the rest of the world during a period of time. 
C) capital gains and losses on a country's international assets. 
D) the value of a country's holdings of foreign assets, minus the value of foreign holdings of the country's assets.

Question 5

When a foreign resident increases her holdings of a U.S. financial asset, the :

Accepted Answer

A) current account of the U.S.balance of payments will be credited. 
B) current account of the U.S.balance of payments will be debited. 
C) financial account of the U.S.balance of payments will be credited. 
D) financial account of the U.S.balance of payments will be debited. 
A) current account of the U.S.balance of payments will be credited. 
B) current account of the U.S.balance of payments will be debited. 
C) financial account of the U.S.balance of payments will be credited. 
D) financial account of the U.S.balance of payments will be debited.

Question 6

The net flow of financial assets and similar claims is the private current account balance.

Accepted Answer

A) True 
 B)False

Question 7

The net value of flows of financial assets and similar claims (excluding official international reserve asset flows) is called the:

Accepted Answer

A) financial account balance. 
B) current account balance. 
C) trade balance. 
D) official reserve balance. 
A) financial account balance. 
B) current account balance. 
C) trade balance. 
D) official reserve balance.

Question 8

When countries have severe balance of payments difficulties caused by unsustainable current account deficits, they can approach the International Monetary Fund (IMF) for assistance. In providing financial assistance, the IMF generally insists that the country implement a series of policy changes designed to reduce the deficit. These programs are controversial as they tend to focus on demand reduction. Explain why demand reduction would solve a current account deficit problem. Would a program designed to increase the nation's GDP growth rate be a method of reducing a current account deficit? Why or why not?

Accepted Answer

One of the views of the current account

Question 9

The official settlements balance is the sum of the capital account balance and the public current account balance.

Accepted Answer

A) True 
 B)False

Question 10

Gold is a major reserve asset that is currently being used in official reserve transactions.

Accepted Answer

A) True 
 B)False

Question 11

The role of international _____ is to direct one nation's savings into another nation's investments.

Accepted Answer

A) merchandise trade flows 
B) services flows 
C) unilateral transfers 
D) capital flows 
A) merchandise trade flows 
B) services flows 
C) unilateral transfers 
D) capital flows

Question 12

A nation is called a creditor if:

Accepted Answer

A) it provided financial assets to other countries. 
B) its net stock of foreign assets is positive. 
C) its current account is in surplus during a time period. 
D) its current account is in deficit during a time period. 
A) it provided financial assets to other countries. 
B) its net stock of foreign assets is positive. 
C) its current account is in surplus during a time period. 
D) its current account is in deficit during a time period.

Question 13

Every international transaction recorded in the balance of payments has both a credit item and a debit item. In the case of a U.S. foreign aid, a debit in the balance of payments, what is the offsetting credit? Explain.

Accepted Answer

Often the foreign aid is in the form of

Question 14

Which of the following is considered a capital inflow?

Accepted Answer

A) A sale of U.S.financial assets to a foreign buyer 
B) A loan from a U.S.bank to a foreign borrower 
C) A purchase of foreign financial assets by a U.S.buyer 
D) A U.S.citizen's repayment of a loan from a foreign bank 
A) A sale of U.S.financial assets to a foreign buyer 
B) A loan from a U.S.bank to a foreign borrower 
C) A purchase of foreign financial assets by a U.S.buyer 
D) A U.S.citizen's repayment of a loan from a foreign bank

Question 15

A country experiencing a current account surplus:

Accepted Answer

A) needs to borrow internationally. 
B) is able to lend internationally. 
C) must also have had a surplus in its overall payments balance. 
D) spends more than it earns on its merchandise and service trade, international income payments and receipts and international transfers. 
A) needs to borrow internationally. 
B) is able to lend internationally. 
C) must also have had a surplus in its overall payments balance. 
D) spends more than it earns on its merchandise and service trade, international income payments and receipts and international transfers.

Question 16

A foreign resident increasing her holdings of a U.S. financial asset will be recorded as a debit item in the financial account of the U.S. balance of payments.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following would tend to contribute to a U.S. current account surplus?

Accepted Answer

A) The United States makes a unilateral tariff reduction on imported goods. 
B) The United States cuts back on American military personnel stationed in Japan. 
C) U.S.tourists travel in large numbers to Asia. 
D) Russian vodka becomes increasingly popular in the United States. 
A) The United States makes a unilateral tariff reduction on imported goods. 
B) The United States cuts back on American military personnel stationed in Japan. 
C) U.S.tourists travel in large numbers to Asia. 
D) Russian vodka becomes increasingly popular in the United States.

Question 18

Which of the following transactions is recorded in the financial account?

Accepted Answer

A) Ford Motor Company of the United States provides part of the financing for a new automobile factory in China. 
B) A Chinese businessman imports Ford automobiles from the United States. 
C) A U.S.tourist spends money on a trip to China. 
D) The New York Yankees are paid $10 million by the Chinese to play an exhibition game in Beijing, China. 
A) Ford Motor Company of the United States provides part of the financing for a new automobile factory in China. 
B) A Chinese businessman imports Ford automobiles from the United States. 
C) A U.S.tourist spends money on a trip to China. 
D) The New York Yankees are paid $10 million by the Chinese to play an exhibition game in Beijing, China.

Question 19

A credit item is an item for which a country must pay.

Accepted Answer

A) True 
 B)False

Question 20

The financial account in the U.S. balance of payments includes:

Accepted Answer

A) everything that is included in the current account. 
B) payments of pensions to U.S.citizens who now live in foreign countries. 
C) profits that Nissan of America sends back to Japan. 
D) new U.S.investments in foreign countries. 
A) everything that is included in the current account. 
B) payments of pensions to U.S.citizens who now live in foreign countries. 
C) profits that Nissan of America sends back to Japan. 
D) new U.S.investments in foreign countries.

Exam 16: Payments Among Nations

The sum of all of the debit items in the balance of payments:

The current account balance of the balance of payments account equals:

A nation is called a lender if:

A country's balance of payments records:

When a foreign resident increases her holdings of a U.S. financial asset, the :

The net flow of financial assets and similar claims is the private current account balance.

The net value of flows of financial assets and similar claims (excluding official international reserve asset flows) is called the:

The official settlements balance is the sum of the capital account balance and the public current account balance.

Gold is a major reserve asset that is currently being used in official reserve transactions.

The role of international _____ is to direct one nation's savings into another nation's investments.

A nation is called a creditor if:

Every international transaction recorded in the balance of payments has both a credit item and a debit item. In the case of a U.S. foreign aid, a debit in the balance of payments, what is the offsetting credit? Explain.

Which of the following is considered a capital inflow?

A country experiencing a current account surplus:

A foreign resident increasing her holdings of a U.S. financial asset will be recorded as a debit item in the financial account of the U.S. balance of payments.

Which of the following would tend to contribute to a U.S. current account surplus?

Which of the following transactions is recorded in the financial account?

A credit item is an item for which a country must pay.

The financial account in the U.S. balance of payments includes:

International Economics Is Different

The Basic Theory Using Demand and Supply

Why Everybody Trades: Comparative Advantage

Trade: Factor Availability and Factor Proportions Are Key

Who Gains and Who Loses From Trade

Scale Economies, Imperfect Competition, and Trade

Growth and Trade Part II: Trade Policy

Analysis of a Tariff

Nontariff Barriers to Imports

Arguments for and Against Protection

Pushing Exports

Trade Blocs and Trade Blocks

Trade and the Environment

Trade Policies for Developing Countries

Multinationals and Migration: International Factor Movements

The Foreign Exchange Market

Forward Exchange and International Financial Investment

What Determines Exchange Rates

Government Policies Toward the Foreign Exchange Market

International Lending and Financial Crises

How Does the Open Macroeconomy Work

Internal and External Balance With Fixed Exchange Rates

Floating Exchange Rates and Internal Balance

National and Global Choices: Floating Rates and the Alternatives

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