Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

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.

Accepted Answer

A) True 
 B)False

Question 3

If a country consistently realizes a current-account surplus in its balance of payments,it likely will become a "net debtor" in its balance of international indebtedness.

Accepted Answer

A) True 
 B)False

Question 4

Unilateral transfers refer to two-sided transactions,reflecting the movement of goods and services in one direction with corresponding payments in the other direction.

Accepted Answer

A) True 
 B)False

Question 5

Reducing a current account deficit requires a country to:

Accepted Answer

A)  Increase the government's deficit and increase private investment relative to saving 
B)  Increase the government's deficit and decrease private investment relative to saving 
C)  Decrease the government's deficit increase private investment relative to saving 
D)  Decrease the government's deficit and decrease private investment relative to saving

Question 6

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

Accepted Answer

A)  The official settlements account 
B)  The capital account 
C)  Either the official settlements account or the capital account 
D)  Both the official settlements account and the capital account

Question 7

Reducing a current account surplus requires a country to:

Accepted Answer

A)  Increase the government's deficit and increase private investment relative to saving 
B)  Increase the government's deficit and decrease private investment relative to saving 
C)  Decrease the government's deficit and increase private investment relative to saving 
D)  Decrease the government's deficit and decrease private investment relative to saving

Question 8

According to researchers at the Federal Reserve,the loss of jobs associated with a deficit in the current account tends to be:

Accepted Answer

A)  Offset by the increase of jobs associated with a surplus in the capital account 
B)  Reinforced by the decrease of jobs associated with a surplus in the capital account 
C)  A threat to the level of employment for the economy as a whole 
D)  Of no long-run economic consequence for workers who lose their jobs

Question 9

Although a net-debtor country may initially benefit from an inflow of savings from abroad,over the long run continued borrowing results in growing dividend payments to foreigners and a drain on the debtor-country's economic resources.

Accepted Answer

A) True 
 B)False

Question 10

Consider Table 10.2.The U.S.balance of international indebtedness suggests that the United States is a net:

Accepted Answer

A)  Debtor 
B)  Creditor 
C)  Spender 
D)  Exporter

Question 11

Reducing a current account deficit requires a country to:

Accepted Answer

A)  Increase private saving relative to investment 
B)  Increase private consumption relative to saving 
C)  Increase private investment relative to consumption 
D)  Increase private investment relative to saving

Question 12

Which balance-of-payments item does not directly enter into the calculation of the U.S.gross domestic product?

Accepted Answer

A)  Merchandise imports 
B)  Shipping and transportation receipts 
C)  Direct foreign investment 
D)  Service exports

Question 13

The United States would be a "net creditor" if the value of U.S.assets abroad exceeded the value of foreign assets in the United States.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would call for inpayments to the United States?

Accepted Answer

A)  American imports of German steel 
B)  Gold flowing out of the United States 
C)  American unilateral transfers to less-developed countries 
D)  American firms selling insurance to British shipping companies

Question 15

The net-debtor status,that the United States achieved in its balance of international indebtedness by the mid-1980s,reflected the continuous current-account surplus that the United States attained in its balance of payments during the 1970s.

Accepted Answer

A) True 
 B)False

Question 16

The U.S.balance of trade is determined by:

Accepted Answer

A)  Exchange rates 
B)  Growth of economies overseas 
C)  Relative prices in world markets 
D)  All of the above

Question 17

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?

Accepted Answer

The answer of How do we measure the international investment...

Question 18

To reduce a current account deficit,a country should either decrease the budget deficit of its government or reduce investment spending relative to saving.

Accepted Answer

A) True 
 B)False

Question 19

The "goods and services" account of the balance of payments shows the monetary value of international flows associated with transactions in goods,services,and unilateral transfers.

Accepted Answer

A) True 
 B)False

Question 20

The burden of a current account deficit would be the least if a nation uses what it borrows to finance:

Accepted Answer

A)  Unemployment compensation benefits 
B)  Social Security benefits 
C)  Expenditures on food and recreation 
D)  Investment on plant and equipment

Exam 10: The Balance of Payments

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.

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.

If a country consistently realizes a current-account surplus in its balance of payments,it likely will become a "net debtor" in its balance of international indebtedness.

Unilateral transfers refer to two-sided transactions,reflecting the movement of goods and services in one direction with corresponding payments in the other direction.

Reducing a current account deficit requires a country to:

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

Reducing a current account surplus requires a country to:

According to researchers at the Federal Reserve,the loss of jobs associated with a deficit in the current account tends to be:

Although a net-debtor country may initially benefit from an inflow of savings from abroad,over the long run continued borrowing results in growing dividend payments to foreigners and a drain on the debtor-country's economic resources.

Consider Table 10.2.The U.S.balance of international indebtedness suggests that the United States is a net:

Reducing a current account deficit requires a country to:

Which balance-of-payments item does not directly enter into the calculation of the U.S.gross domestic product?

The United States would be a "net creditor" if the value of U.S.assets abroad exceeded the value of foreign assets in the United States.

Which of the following would call for inpayments to the United States?

The net-debtor status,that the United States achieved in its balance of international indebtedness by the mid-1980s,reflected the continuous current-account surplus that the United States attained in its balance of payments during the 1970s.

The U.S.balance of trade is determined by:

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?

To reduce a current account deficit,a country should either decrease the budget deficit of its government or reduce investment spending relative to saving.

The "goods and services" account of the balance of payments shows the monetary value of international flows associated with transactions in goods,services,and unilateral transfers.

The burden of a current account deficit would be the least if a nation uses what it borrows to finance: