Question 1

What can one learn from Figure 13-2 from the text, shown below?

Accepted Answer

This figure shows that since the 1980s, United States foreign assets and liabilities have both increased rapidly. However, liabilities have risen faster than U.S. foreign assets, resulting in a substantial net foreign debt.

Question 2

Disposable income is national income

Accepted Answer

A)   less taxes collected from households and firms by the government.
B)   plus net taxes collected from households and firms by the government.
C)   less net taxes collected from firms by the government.
D)   less net taxes collected from households by the government.
E)   less net taxes collected from households and firms by the government. E

Question 3

How can changes in the market price of wealth previously acquired alter a country's net foreign wealth?

Accepted Answer

When Japan's stock market lost value in the 1990s, American and European owners of Japanese assets lost value in their claims, while Japan's net foreign wealth increased. Similarly, exchange rate changes can have this effect. When the dollar depreciates against foreign currency, foreigners who hold dollar assets will see their wealth fall when measured in their home currencies.

Question 4

GDP is different than GNP in that

Accepted Answer

A)   it accounts for net unilateral transfers.
B)   it does not account for indirect business taxes.
C)   it does not account for a country's production using services with foreign-owned capital.
D)   it accounts for depreciation.
E)   it is unhelpful when tracking national income.

Question 5

How does an economy's central bank manage the supply of money through official reserve transactions?

Accepted Answer

The answer of How does an economy's central bank manage...

Question 6

Fill in the following table.

Accepted Answer

The answer of Fill in the following table.
 ...

Question 7

Assume in a closed economy:
C = 40 + 0.8(Y - T)
G = 10
I = 20
T = 0, where T are taxes.
(a)Calculate Y at equilibrium.
(b)Calculate C, I, and G at equilibrium.
(c)Now assume the economy is open with exports and imports activities,

Accepted Answer

The answer of Assume in a closed economy:
C = 40...

Question 8

In a closed economy, private saving, , is equal to

Accepted Answer

A)   I - (G - T) .
B)   I + (G - T) .
C)   I + (G + T) .
D)   I - (G + T) .
E)   I + (G - T)  + C.

Question 9

Which of the following statements about the central bank is TRUE?

Accepted Answer

A)   Only the central bank may hold foreign reserves and intervene officially in exchange markets.
B)   Central banks have little power to affect macroeconomic conditions.
C)   Today, central banks' reserves consist largely of gold.
D)   The Federal Reserve holds only a small level of official reserve assets other than gold.
E)   Central banks never inject money into the economy.

Question 10

The services British capital provides in Spain are a service export from Britain

Accepted Answer

A)   therefore they are subtracted from British GDP in calculating British GNP.
B)   therefore they are added to Spanish GDP in calculating Spanish GDP.
C)   therefore they are added to British GDP in calculating British GNP.
D)   therefore they are added to Spanish GNP in calculating Spanish GDP.
E)   therefore they are subtracted from Spanish GNP.

Question 11

The largest component of GNP is

Accepted Answer

A)   the current account.
B)   investment.
C)   government purchases.
D)   consumption.
E)   trade.

Question 12

Government purchases currently take up about

Accepted Answer

A)   17 percent of U.S. GNP, and this share has not changed much since the late 1950s.
B)   38 percent of U.S. GNP, and this share has not changed much since the late 1950s.
C)   18 percent of U.S. GNP, and this share has been increasing since the late 1950s.
D)   18 percent of U.S. GNP, and this share has been decreasing since the late 1950s.
E)   25 percent of U.S. GNP, and this share has been decreasing since the late 1950s.

Question 13

You travel to Paris and pay for a $100 dinner with your credit card. How is this accounted for in the balance of payments?

Accepted Answer

A)   current account, French service import
B)   current account, U.S. good export
C)   financial account, U.S. asset export
D)   financial account, U.S. asset import
E)   financial account, French asset export

Question 14

A country's current account

Accepted Answer

A)   balance equals the change in its net foreign wealth.
B)   balance equals the change in its foreign wealth.
C)   surplus equals the change in its foreign wealth.
D)   deficit equals the change in its foreign wealth.
E)   balance equals its GNP.

Question 15

Over the 1980s

Accepted Answer

A)   there is no question that a large increase in U.S. foreign assets did occur.
B)   there is a question whether a large decrease in U.S. foreign assets did occur.
C)   there is no question that a large decrease in U.S. foreign assets did occur.
D)   there is no question that there was almost no change in U.S. foreign assets.
E)   there is no question that rising exports exceeded U.S. foreign debt.

Question 16

Investment is usually

Accepted Answer

A)   more variable than consumption.
B)   less variable than consumption.
C)   as variable as consumption.
D)   a larger component of the GNP than consumption.
E)   It is hard to tell from the data whether investment is more or less variable than consumption.

Question 17

In an open economy, private saving, , is equal to

Accepted Answer

A)   I - CA + (G - T) .
B)   I + CA - (G - T) .
C)   I + CA + (G - T) .
D)   I - CA - (G - T) .
E)   I + CA + (G + T) .

Question 18

Consider how the United States balance of payments accounts are affected when U.S. banks forgive two billion in debt owed to them by the government of Argentina.

Accepted Answer

The answer of Consider how the United States balance of...

Question 19

The United States began to report its gross domestic product (GDP) only since

Accepted Answer

A)   1900.
B)   1921.
C)   1931.
D)   1941.
E)   1991.

Question 20

In the United States over the past sixty years, the fraction of GNP devoted to consumption has fluctuated in a range of about

Accepted Answer

A)   42 to 49 percent.
B)   32 to 39 percent.
C)   22 to 29 percent.
D)   82 to 89 percent.
E)   62 to 70 percent.

Exam 13: National Income Accounting and the Balance of Payments