Exam 3: The Balance of Payments

Construct, in a static (accounting) form the equation for a nations GDP as presented by the authors. Identify each term (e.g., r = interest rate). How does a positive BOP account balance affect a country's GDP?

China holds a massive amount of foreign exchange reserves. As of 2010 they held nearly $2,500 billion. This huge foreign exchange reserve should allow China to

The era between 1880 and 1914, when the gold standard was in use, was characterized by increasing capital mobility.

If most major economies are operating under a regime of fixed exchange rates, then a ________ in a country's balance of payments suggests that the country should ________ its currency.

The immediate impact on the balance of trade (BOT) for a country in deficit when there is an immediate devaluation of its currency is likely to be an even larger BOT deficit than prior to devaluation.

The ________ includes all international economic transactions with income or payment flows occurring within the year.

The J-curve adjustment path for trade balance adjustments assumes that export products are predominantly priced in the ________ currency and that import products are predominantly priced in the ________ currency.

Which of the following is the best definition of money laundering?

The ________ is the difference between merchandise imports and exports and a measure of a country's international trade in goods and services.

Over the last several years, the United States has run a ________ in the goods trade balance and a ________ in the services trade balance.

Two types of business transactions dominate the balance of payments. Which of the following is NOT such a transaction?

In general there is consensus that ________ should be free but there is no such consensus that ________ should be free.

Because current and financial/capital account balances use double-entry book keeping it is unusual to find serious discrepancies in the debits and credits.

Identify and explain the three stages of the J-curve adjustment path of the trade balance adjustment process.

Balance of payment (BOP) data may be important for any of the following reasons

The authors identify a tip for understanding BOP accounting. They recommend that you "follow the cash flow."

Which of the following is NOT a part of the Current Account of BOP?

According to the authors, the following types of transactions dominate the balance of payments

In a static (accounting) sense, a nation's GDP can be represented by the following equation: where C = consumption spending, I = investment spending, G = government spending, X = exports of goods and services, and M = imports of goods and services.

The J-curve adjustment path for trade balance adjustments assumes that ________ products are predominantly priced in the domestic currency and that ________ products are predominantly priced in the foreign currency