90) If private savings equals $1.2 billion and private investment equals $1.5 billion, then
there is a
A) private sector surplus.
B) private sector deicit.
C) government sector surplus.
D) government sector deicit.
E) current account balance.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
91) The government sector balance equals
A) saving plus investment.
B) saving minus investment.
C) net taxes minus government expenditures.
D) net taxes plus government expenditures.
E) government expenditures plus investment.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
92) Which of the following is correct?
i. The private sector balance equals saving minus investment.
ii. Net exports is exports of goods and services plus imports of goods and services.
iii. Net exports equals the sum of the private sector balance plus the government sector
balance.
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
31
93) Deine X = exports, M = imports, S = saving, I = investment, T = net taxes, G =
government expenditure. Which of the following formulas is correct?
A) X – M = S + I + T – G
B) X – M = S – I + T – G
C) X – M = S – I – T – G
D) X – M = S + I +T + G
E) X – M = S + I –T + G
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
94) Net exports are the sum of
A) exports and imports.
B) the private sector balance and the government sector balance.
C) the current account balance and capital account balance.
D) the balance of payments accounts.
E) the current account balance and the oicial settlements account balance.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
95) The private sector balance is equal to savings ________ investment, and the government
sector balance is equal to government expenditure ________ taxes. If there is a deicit in the
private sector balance and a deicit in the government sector balance, then there must be a
________ in net exports.
A) minus; minus; surplus
B) plus; minus; surplus
C) minus; minus; deicit
D) plus; plus; deicit
E) plus; plus; surplus
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
32
96) A country has imports of goods and services at $2,000 billion. The interest paid to the
rest of the world is $500 billion. The interest received from the rest of the world is $400
billion. The decrease in oicial reserves is $10 billion. The government sector balance is
$200 billion, savings is $1,800 billion, investment is $2,000 billion, and net transfers is
zero. What are net exports?
A) $100 billion
B) -$100 billion
C) -$200 billion
D) $0
E) $200 billion
Skill: Level 4: Applying models
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
97) A country has imports of goods and services at $2,000 billion. The interest paid to the
rest of the world is $500 billion. The interest received from the rest of the world is $400
billion. The decrease in oicial reserves is $10 billion. The government sector balance is
$200 billion, savings is $1,800 billion, investment is $2,000 billion, and net transfers is
zero. What is the current account balance?
A) $100 billion
B) -$100 billion
C) -$200 billion
D) -$10 billion
E) $200 billion
Skill: Level 4: Applying models
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
98) A country has imports of goods and services at $2,000 billion. The interest paid to the
rest of the world is $500 billion. The interest received from the rest of the world is $400
billion. The decrease in oicial reserves is $10 billion. The government sector balance is
$200 billion, savings is $1,800 billion, investment is $2,000 billion, and net transfers is
zero. Using the information above, what is the capital account balance?
A) $90 billion
B) -$90 billion
C) -$10 billion
D) $10 billion
E) -$200 billion
Skill: Level 4: Applying models
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
33
The table above has information about the U.S. economy.
99) Refer to the table above. Net exports equal
A) -$200 billion.
B) $200 billion.
C) -$2,800 billion.
D) $2,800 billion.
E) $400 billion.
Skill: Level 3: Using models
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
100) Refer to the table above. The private sector balance is a
A) $700 billion deicit.
B) $700 billion surplus.
C) $2,900 billion deicit.
D) $2,900 billion surplus.
E) $400 billion deicit.
Skill: Level 3: Using models
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
101) Refer to the table above. The government sector balance is a
A) $900 billion deicit.
B) $900 billion surplus.
C) $2,900 billion balanced budget.
D) $2,900 billion trade deicit.
E) $500 billion deicit.
Skill: Level 3: Using models
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
102) A country’s balance of payments accounts records its
A) tax receipts and expenditures.
B) tarifs and nontarif revenue and government purchases.
C) international trading, borrowing, and lending.
D) international exports and imports and nothing else.
E) tarif receipts and what it pays in tarifs to other nations.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
103) Which of the following are balance of payments accounts?
i. capital and inancial account
ii. tarif account
iii. current account
A) i only
B) ii only
C) iii only
D) i and iii
E) ii and iii
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
104) Which balance of payments account records payments for imports and exports?
A) current account
B) capital and inancial account
C) oicial settlements account
D) reserves account
E) trade account
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Written and oral communication
35
105) The current account balance is equal to
A) imports – exports + net interest + net transfers.
B) imports – exports + net interest – net transfers.
C) exports – imports – net interest + net transfers.
D) exports – imports + net interest + net transfers.
E) exports – imports – net interest – net transfers.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
106) If an investment of $100 million from the United Kingdom is made in the United
States, the $100 million is listed as a ________ entry in the ________ account.
A) positive; current
B) negative; capital and inancial
C) positive; capital and inancial
D) negative; current
E) positive; oicial settlements
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
107) If the United States receives $200 billion of foreign investment and at the same time
invests a total of $160 billion abroad, then the U.S.
A) capital and inancial account balance increases by $40 billion.
B) current account must be in surplus.
C) balance of payments must be negative.
D) capital and inancial account balance decreases by $40 billion.
E) oicial settlements account balance increases by $40 billion.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
36
108) In the balance of payments accounts, changes in U.S. oicial reserves are recorded in
the
A) current account.
B) capital and inancial account.
C) oicial settlements account.
D) international currency account.
E) international reserves account.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
109) If a country has a current account balance of $100 billion and the oicial settlements
account balance is zero, then the country’s capital and inancial account balance must be
A) equal to $100 billion.
B) positive but not necessarily equal to $100 billion.
C) equal to -$100 billion.
D) negative but not necessarily equal to -$100 billion.
E) zero.
Skill: Level 3: Using models
Section: Checkpoint 19.1
Status: Old
AACSB: Analytical thinking
110) A country that is borrowing more from the rest of the world than it is lending is called
a
A) net lender.
B) net borrower.
C) net debtor.
D) net creditor.
E) net loaner country.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
37
111) A debtor nation is a country that
A) borrows more from the rest of the world than it lends to it.
B) lends more to the rest of the world than it borrows from it.
C) during its entire history has invested more in the rest of the world than other countries
have invested in it.
D) during its entire history has borrowed more from the rest of the world than it has lent to
it.
E) during its entire history has consistently run a capital account deicit.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
112) Comparing the U.S. balance of payments in 2012 to the rest of the world, we see that
the
A) United States has the largest current account surplus.
B) U.S. current account is similar in size to most developed nations and has a surplus.
C) United States has the largest capital and inancial account deicit.
D) United States has the largest current account deicit.
E) U.S. current account is similar in size to most developed nations and has a deicit.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
113) According to the U.S. balance of payments accounts in 2012, U.S. international
borrowing is used for
A) private and public investment.
B) private consumption.
C) government expenditure.
D) private and public saving.
E) private saving and public consumption.
Skill: Level 1: Deinition
Section: Checkpoint 19.1
Status: Old
AACSB: Relective thinking
38
19.2 The Exchange Rate
1) When a Mexican company purchases a U.S.-made computer, the Mexican company pays
for it with
A) U.S. dollars.
B) Mexican pesos.
C) gold.
D) Mexican goods and services.
E) euros or yen.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
2) The price at which one currency exchanges for another currency is called the
A) currency exchange rate.
B) net export exchange rate.
C) money exchange rate.
D) foreign exchange rate.
E) value of the dollar.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
3) The foreign exchange rate is deined as the
A) rate or the speed with which the currencies of the worlds are traded.
B) volume of the world currencies traded.
C) price at which one currency exchanges for another.
D) equal to the amount of the current account deicit.
E) equal to the amount of the capital account deicit.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
39
4) The exchange rate between the United States and Japan
A) consistently increases over time.
B) consistently decreases over time.
C) is ixed so it does not change.
D) luctuates, sometimes rising and sometimes falling.
E) does not exist.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
5) The demand for the U.S. dollar in the foreign exchange market is a derived demand. A
derived demand means that the demand is derived from
A) the supply of U.S. dollars.
B) government policy.
C) the demand for U.S. goods, services, and assets.
D) the domestic demand for U.S. goods and services.
E) the demand by U.S. residents for foreign goods, services, and assets.
Skill: Level 2: Using deinitions
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
6) When a currency decreases in value relative to another currency, the currency has
A) accelerated.
B) decelerated.
C) depreciated.
D) appreciated.
E) declined.
Skill: Level 1: Deinition
Section: Checkpoint 19.2
Status: Old
AACSB: Relective thinking
40