Foundations of Macroeconomics, 7e (Bade/Parkin)
Chapter 19 International Finance
19.1 Financing International Trade
1) The record of international receipts and payments is called the
A) balance of payments.
B) current account.
C) oicial settlements account.
D) capital and inancial account.
E) U.S. oicial reserves.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
2) The trade between countries is recorded in accounts called the balance of
A) international trade accounts.
B) export and import accounts.
C) payments accounts.
D) currency accounts.
E) U.S. oicial trade account.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
3) The balance of payments accounts record all of the following EXCEPT the country’s
A) domestic investment.
B) international borrowing.
C) international trading.
D) international lending.
E) change in oicial reserves.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
1
4) Which of the following is a balance of payments account?
i. current account
ii. past account
iii. capital and inancial account
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
5) The current account is the record of
A) a nation’s international trading, borrowing, and lending.
B) payments for imports, receipts for exports, net interest, and net transfers.
C) foreign investment in the nation minus the nation’s investment abroad.
D) changes in the government’s holdings of foreign currency.
E) the nation’s exports but not its imports.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
6) The U.S. current account records
A) all the international transactions during the current year.
B) the current value of the balance of payments in U.S. dollars.
C) transactions involving trade, interest payments, and net transfers.
D) transactions involving foreign investment in the United States and U.S. investment
abroad.
E) U.S. exports but not U.S. imports, which are recorded in the capital account.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
2
7) The value of imports and exports is recorded in
A) international trade account.
B) oicial settlements account.
C) capital and inancial account.
D) current account.
E) oicial reserves account.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
8) When a U.S. company purchases $1 million worth of French cheese, the value of that
transaction is recorded in the
A) capital and inancial account.
B) investment account.
C) current account.
D) transfer account.
E) goods account.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
9) When a U.S. company makes a $200,000 donation to the International Red Cross to help
the victims of an earthquake in India, the transaction is recorded in the
A) oicial settlements account.
B) current account.
C) international help account.
D) capital and inancial account.
E) one-way donations account.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
3
10) In the current account, the largest category of international transactions is
A) net interest.
B) international investment.
C) net transfers.
D) imports.
E) statistical discrepancy.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
11) In 2012, the United States had
A) a current account surplus because imports were greater than exports.
B) a capital and inancial account deicit because exports were greater than imports.
C) a current account deicit because imports were greater than exports.
D) no change in U.S. oicial reserves.
E) a current account deicit and a capital and inancial account deicit.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
12) Interest received from U.S. holdings of foreign assets and interest paid to foreigners for
U.S. investment assets is recorded in the
A) capital and inancial account.
B) oicial settlements account.
C) oicial reserves account.
D) current account.
E) oicial dollar account.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
4
13) Suppose you own some German government bonds that pay you interest every year.
This interest is entered into which of the balance of payments accounts?
A) current account
B) capital and inancial account
C) oicial settlements account
D) trade account
E) interest account
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
14) If the current account balance is negative, net interest is $100 billion and net transfer
is -$100 billion, then
A) imports exceed exports.
B) exports exceed imports.
C) real GDP exceeds potential GDP.
D) the oicial settlements account must be positive.
E) the oicial settlements account must be negative.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
15) In 2008, the U.S. current account balance was -$706 billion, net interest was +$119
billion, net transfers were -$128 billion, and exports were +$1,827 billion. Therefore,
imports were
A) -$2,524 billion.
B) +$2,524 billion.
C) +$1,112 billion.
D) -$1,112 billion.
E) +$2,780 billion.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
5
16) If the current account balance is -$100 billion, net interest = $0, net transfers = $0,
then
A) exports are greater than imports.
B) imports are greater than exports.
C) the capital and inancial account balance must be +$100 billion.
D) there was an increase in net foreign assets.
E) the country is loaning abroad.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
17) If the United States imports goods and services for a total of $45 billion, exports goods
and services for a total of $40 billion, records $4 billion as net interest and zero as net
transfers, then the U.S. current account balance is
A) $89 billion.
B) $1 billion.
C) zero.
D) -$1 billion.
E) $81 billion.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
18) The capital and inancial account is the record of
A) a nation’s international trading, borrowing, and lending.
B) payments for imports, receipts for exports, net interest, and net transfers.
C) foreign investment in the nation minus the nation’s investment abroad.
D) changes in the government’s holdings of foreign currency.
E) the nation’s imports and exports of capital goods.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
6
19) The capital and inancial account records
A) all the purchases and sales of capital goods in the United States.
B) the current value of the balance of payments in U.S. dollars.
C) transactions involving trade, interest payments, and net transfers.
D) transactions involving foreign investment in the United States and U.S. investment
abroad.
E) imports and exports of capital goods.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
20) Foreign investment in the United States and U.S. investment abroad is recorded in the
A) investment account.
B) oicial settlements account.
C) capital and inancial account.
D) current account.
E) creditor/debtor account.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
21) In the capital and inancial account, the largest category of international transactions is
A) net interest.
B) foreign investment in the United States.
C) net transfers.
D) exports and imports.
E) statistical discrepancy.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
7
22) When a German company purchases a U.S. company for $20 million, in the balance of
payments the value of that transaction is recorded in the
A) purchase account.
B) current account.
C) investment account.
D) capital and inancial account.
E) oicial purchases account.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
23) Toyota purchases a truck factory in San Antonio, Texas. This purchase is entered into
which of the balance of payment accounts?
A) current account
B) oicial settlements account
C) trade account
D) capital and inancial account
E) foreign account
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
24) Suppose IBM purchases a factory in Japan. This purchase is entered into which of the
balance of payments accounts?
A) current account
B) capital and inancial account
C) oicial settlements account
D) trade account
E) purchases account
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
8
25) Suppose Honda purchases a car factory in the United States. This purchase is entered
into which of the balance of payments accounts?
A) current account
B) capital and inancial account
C) oicial settlements account
D) trade account
E) business purchases account
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
26) Microsoft’s purchase of a factory in Mexico is entered into the U.S. balance of payments
accounts as a
A) negative entry in the capital and inancial account.
B) positive entry in the capital and inancial account.
C) negative entry in the current account.
D) positive entry in the current account.
E) negative entry in the settlements account.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
27) The capital and inancial account balance is equal to
A) foreign investment in the United States minus U.S. investment abroad.
B) exports minus imports.
C) foreign assets owned by the United States minus U.S. assets owned by foreigners.
D) U.S. investment abroad minus foreign investment in the United States.
E) the value of exports of U.S. capital goods minus the value of imports of capital goods into
the United States.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
9
28) In a year, if foreigners invest ________ in the United States than the United States
invests abroad, the capital and inancial account balance is ________.
A) more; positive
B) less; positive
C) more than; negative
D) less; zero
E) more; zero
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
29) When the U.S. capital and inancial account shows a positive balance, that is an
indication of
A) the value of all U.S. exports exceeding the value of all U.S. imports.
B) the United States acquiring more foreign reserves.
C) U.S. industries becoming more competitive.
D) foreigners investing more in the United States than the United States is investing
abroad.
E) the value of U.S. exports of capital goods exceeding the value of U.S. imports of capital
goods.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
30) U.S. oicial reserves are
A) equal to the value of the government’s oil reserves.
B) the government’s holding of foreign currency.
C) equal to the government’s holding of gold.
D) equal to the value of U.S. government debt in the hands of foreigners.
E) equal to the balance on the capital and inancial account.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
10