Exam 10: The Balance of Payments

Since the 1970s, the merchandise trade account of the U.S. balance of payments has registered deficit.

Debt (-) items in the balance of payments correspond to anything that:

All of the following are debit items in the balance of payments, except:

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 goods-and-services balance registered a surplus of $50 billion.

Which of the following is classified as a $\underline { \text { credit } }$ in the U.S. balance of payments?

Most economists belief that in the 1980s, a massive outflow of capital caused a current account deficit for the United States.

Rapid growth of production and employment is commonly associated with large or growing trade surpluses and current account surpluses.

A current account deficit for the United States necessarily reduces the standard of living for American households.

Table 10.2. International Investment Position of the United States U.S. assets abroad U.S. government assets \ 800 billion U.S. private assets \ 200 billion Foreign assets in the U.S. Foreign official assets \ 600 billion Foreign private assets \ 300 billion -Consider Table 10.2. The U.S. balance of international indebtedness suggests that the United States is a net:

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 unilateral-transfers balance registered a deficit of $40 billion.

If a country realizes a current-account deficit in its balance of payments, it becomes a net supplier of funds to the rest of the world.

For the United States, merchandise trade has generally constituted the largest portion of its goods-and-services account.

On the U.S. balance-of-payments statement, a capital inflow would occur if a Swiss resident purchases the securities of the U.S. government.

How do we measure the international investment position of the United States at any point in time? How did the U.S. become a net debtor nation so rapidly?

The capital account of the balance of payments includes private-sector transactions as well as official-settlements transactions of the home country's central bank.

If Toyota Inc. of Japan builds an automobile assembly plant in the United States, the Japanese capital account would register an outflow.

Because the balance of payments utilizes double-entry accounting, merchandise exports will always be in balance with merchandise imports.

Reducing a current account deficit requires a country to:

The current account of the U.S. balance of payments does $\underline { \text { not } }$ include:

If the U.S. faces a balance-of-payments deficit on the current account, it must run a surplus on: