Exam 10: The Balance of Payments

What does a current account deficit mean?

$\underline { \text { Unlike } }$ the balance of payments, the balance of international indebtedness indicates the international:

Because the balance of payments is a record of the economic transactions of a country over a period of time, it is a "flow" concept.

The balance of payments includes international transactions of households and businesses, but not government.

What are the components of the current account of the balance of payments?

Which of the following is considered a capital $\underline { \text { inflow } }$ ?

Concerning a country's business cycle, ____ is commonly associated with large or growing current account deficits:

The U.S. has a balance of $\underline { \text { trade deficit } }$ when its:

On the U.S. balance of payments, the following transactions are debits, leading to payments to foreigners: merchandise imports, travel expenditures, gifts to foreign residents, and overseas investments by U.S. residents.

That German investors collect interest income on their holdings of U.S. Treasury bills constitutes a credit transaction on the U.S. balance of payments.

Which of the following would call for $\underline { \text { inpayments } }$ to the United States?

By the mid-1980s, the United States had evolved from the status of a net-creditor nation to a net-debtor nation in its balance of international indebtedness.

A country that is a net international debtor initially experiences:

Table 10.3 shows hypothetical transactions, in billions of U.S. dollars, that took place during a year. Table 10.3. International Transactions of the United States Transaction Allocation of SDRs Changes in U.S. assets abroad Statistical discrepancy Merchandise imports Payments on foreign assets in U.S. Remittances, pensions, transfers Travel and transportation receipts, net Military transactions, net Investment income, net Merchandise exports U.S. government grants (excluding military) Changes in foreign assets in the U.S. Other services, net Receipts on U.S. investments abroad Compensation of employees Amount (billions of dollars) 10 100 -15 -400 -20 -60 30 -10 100 350 -20 190 80 30 -10 -Refer to Table 10.3. The current-account balance registered a surplus of $30 billion.

Concerning the balance of international indebtedness, when is a country a net creditor or a net debtor?

Table 10.3 shows hypothetical transactions, in billions of U.S. dollars, that took place during a year. Table 10.3. International Transactions of the United States Transaction Allocation of SDRs Changes in U.S. assets abroad Statistical discrepancy Merchandise imports Payments on foreign assets in U.S. Remittances, pensions, transfers Travel and transportation receipts, net Military transactions, net Investment income, net Merchandise exports U.S. government grants (excluding military) Changes in foreign assets in the U.S. Other services, net Receipts on U.S. investments abroad Compensation of employees Amount (billions of dollars) 10 100 -15 -400 -20 -60 30 -10 100 350 -20 190 80 30 -10 -Refer to Table 10.3. The services balance registered a surplus of $100 billion.

If the current account of the balance of payments registers a deficit, the capital account registers a surplus, and vice versa.

Table 10.3 shows hypothetical transactions, in billions of U.S. dollars, that took place during a year. Table 10.3. International Transactions of the United States Transaction Allocation of SDRs Changes in U.S. assets abroad Statistical discrepancy Merchandise imports Payments on foreign assets in U.S. Remittances, pensions, transfers Travel and transportation receipts, net Military transactions, net Investment income, net Merchandise exports U.S. government grants (excluding military) Changes in foreign assets in the U.S. Other services, net Receipts on U.S. investments abroad Compensation of employees Amount (billions of dollars) 10 100 -15 -400 -20 -60 30 -10 100 350 -20 190 80 30 -10 -Refer to Table 10.3. The payments data suggest that the United States was a "net demander" of $30 billion from the rest of the world.

The merchandise-trade account on the balance-of-payments statement is defined the same way as "net exports" which constitutes part of the nation's gross domestic product.

Services transactions on Canada's balance-of-payments statement would include Canadian ships transporting lumber to Japan, foreign tourists spending money in Canada, and Canadian engineers designing bridges in China.