Chapter 41 The Balance of Payments, Exchange Rates, and Trade Deficits Answer
Key
Multiple Choice Questions
1.
International transactions fall into what two broad categories?
2.
“International trade” refers to
3.
If a U.S. importer can purchase 10,000 British pounds for $20,000, the rate of exchange is
41-2
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written consent of McGraw-Hill Education.
Access i b i l i t y : Keyboard Navigation
Blooms: Understand
Dif ficul t y: 02 Medium
Learning Objective: 41–01 Explain how currencies of different nations are exchanged when
international transactions take place.
Test Bank: I
T o p i c : International Financial Transactions
4.
In international financial transactions, what are the only two things that individuals and firms
can exchange?
5.
Which of the following would call for inpayments to the United States?
6.
Which of the following would call for outpayments from the United States?
41-3
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written consent of McGraw-Hill Education.
B. The United States purchases assets abroad.
C.
Foreigners purchase assets in the United States.
D.
Foreign tourists spend money in the United States.
7.
The current account section in a nation’s balance of payments includes
8.
A nation’s capital and financial account
9.
In 2015, the capital account in the U.S. balance of payments was in
10.
In 2015, the capital and financial account in the U.S. balance of payments was in
11.
The financial account balance is a nation’s
41-5
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written consent of McGraw-Hill Education.
D i f f i c u l t y : 03 Hard
Learning Objective: 41-02 Analyze the balance sheet the United States uses to account for the
international payments it makes and receives.
Test Bank: I
T o p i c : The Balance of Payments
12.
In the U.S. balance of payments, foreign purchases of assets in the United States are a
13.
In the U.S. balance of payments, U.S. purchases of assets abroad are a(n)
14.
Which of the following combinations is plausible, as it relates to a nation‘s balance of
payments?
41-6
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written consent of McGraw-Hill Education.
billion.
C.
Current account = +$10 billion; capital account = +$40 billion; financial account = +$50
billion.
D. Current account = +$30 billion; capital account = −$20 billion; financial account = −$10
billion.
15.
Which of the following combinations is plausible, as it relates to a nation‘s balance of
payments?
16.
There must always be a balance of a nation‘s
41-7
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written consent of McGraw-Hill Education.
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Analyze
D i f f i c u l t y : 03 Hard
Learning Objective: 41-02 Analyze the balance sheet the United States uses to account for the
international payments it makes and receives.
Test Bank: I
T o p i c : The Balance of Payments
17.
(1) US Goods Exports
+$100
(2) US Goods Imports
−80
(3) US Service Exports
+40
(4) US Service Imports
−90
(5) Net Investment Income
+20
(6) Net Transfers
−15
(7) Foreign Purchases of Assets in the United States
+30
(8) US Purchases of Foreign Assets Abroad
-10
(9) Balance on Capital Account
+5
The table contains hypothetical data for the 2016 U.S. balance of payments. All figures are in
billions of dollars. The United States has a balance of goods
18.
(1) US Goods Exports
+$100
(2) US Goods Imports
−80
(3) US Service Exports
+40
(4) US Service Imports
−90
(5) Net Investment Income
+20
(6) Net Transfers
−15
(7) Foreign Purchases of Assets in the United States
+30
(8) US Purchases of Foreign Assets Abroad
-10
(9) Balance on Capital Account
+5
The table contains hypothetical data for the 2016 U.S. balance of payments. All figures are in
billions of dollars. The U.S. balance on goods and services is a
19.
(1) US Goods Exports
+$100
(2) US Goods Imports
−80
(3) US Service Exports
+40
(4) US Service Imports
−90
(5) Net Investment Income
+20
(6) Net Transfers
−15
(7) Foreign Purchases of Assets in the United States
+30
(8) US Purchases of Foreign Assets Abroad
-10
(9) Balance on Capital Account
+5
The table contains hypothetical data for the 2016 U.S. balance of payments. All figures are in
billions of dollars. The U.S. balance on current account is a
41-9
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written consent of McGraw-Hill Education.
C.
$25 billion surplus.
D.
$30 billion deficit.
20.
(1) US Goods Exports
+$100
(2) US Goods Imports
−80
(3) US Service Exports
+40
(4) US Service Imports
−90
(5) Net Investment Income
+20
(6) Net Transfers
−15
(7) Foreign Purchases of Assets in the United States
+30
(8) US Purchases of Foreign Assets Abroad
-10
(9) Balance on Capital Account
+5
The table contains hypothetical data for the 2016 U.S. balance of payments. All figures are in
billions of dollars. Item 6 indicates that
21.
41–10
(1) US Goods Exports
+$100
(2) US Goods Imports
−80
(3) US Service Exports
+40
(4) US Service Imports
−90
(5) Net Investment Income
+20
(6) Net Transfers
−15
(7) Foreign Purchases of Assets in the United States
+30
(8) US Purchases of Foreign Assets Abroad
-10
(9) Balance on Capital Account
+5
The table contains hypothetical data for the 2016 U.S. balance of payments. All figures are in
billions of dollars. Item 5 indicates
22.
(1) US Goods Exports
+$100
(2) US Goods Imports
−80
(3) US Service Exports
+40
(4) US Service Imports
−90
(5) Net Investment Income
+20
(6) Net Transfers
−15
(7) Foreign Purchases of Assets in the United States
+30
(8) US Purchases of Foreign Assets Abroad
-10
(9) Balance on Capital Account
+5
The table contains hypothetical data for the 2016 U.S. balance of payments. All figures are in
billions of dollars. The United States’ balance on financial account is a
23.
(1) US Goods Exports
+$100
(2) US Goods Imports
−80
(3) US Service Exports
+40
(4) US Service Imports
−90
(5) Net Investment Income
+20
(6) Net Transfers
−15
(7) Foreign Purchases of Assets in the United States
+30
(8) US Purchases of Foreign Assets Abroad
-10
(9) Balance on Capital Account
+5
The table contains hypothetical data for the 2016 U.S. balance of payments. All figures are in
billions of dollars. The United States’ balance of capital and financial account is a
41–12
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
T o p i c : The Balance of Payments
Type: Table
24.
If a nation’s goods exports are $55 billion, while its goods imports are $50 billion, we can
conclude with certainty that this nation has a
25.
It may be misleading to label a trade deficit as unfavorable or adverse, because
26.
Which of the following is not included in the current account of a nation’s balance of
payments?
41–13
27.
A deficit on the current account
28.
Current Account
(1) Goods Exports
+$80
(2) Goods Imports
−70
(3) Exports of Services
+20
(4) Imports of Services
−25
(5) Net Investment Income
+5
(6) Net Transfers
−5
Financial Account
(7) Foreign Purchases of Assets in the United States
+13
(8) US Purchases of Foreign Assets Abroad
-23
Capital Account
(9) Balance on Capital Account
+5
The table contains 2016 balance of payments data (+ and −) for the hypothetical nation of
Zabella. All figures are in billions of dollars. Zabella has a balance of trade (goods)
29.
Current Account
(1) Goods Exports
+$80
(2) Goods Imports
−70
(3) Exports of Services
+20
(4) Imports of Services
−25
(5) Net Investment Income
+5
(6) Net Transfers
−5
Financial Account
(7) Foreign Purchases of Assets in the United States
+13
(8) US Purchases of Foreign Assets Abroad
-23
Capital Account
(9) Balance on Capital Account
+5
The table contains 2016 balance of payments data (+ and −) for the hypothetical nation of
Zabella. All figures are in billions of dollars. Zabella’s balance on goods and services shows a
41–15
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
T o p i c : The Balance of Payments
Type: Table
30.
Current Account
(1) Goods Exports
+$80
(2) Goods Imports
−70
(3) Exports of Services
+20
(4) Imports of Services
−25
(5) Net Investment Income
+5
(6) Net Transfers
−5
Financial Account
(7) Foreign Purchases of Assets in the United States
+13
(8) US Purchases of Foreign Assets Abroad
-23
Capital Account
(9) Balance on Capital Account
+5
The table contains 2016 balance of payments data (+ and −) for the hypothetical nation of
Zabella. All figures are in billions of dollars. Zabella‘s balance on financial account shows a
31.
Current Account
(1) Goods Exports
+$80
(2) Goods Imports
−70
(3) Exports of Services
+20
41–16
(4) Imports of Services
−25
(5) Net Investment Income
+5
(6) Net Transfers
−5
Financial Account
(7) Foreign Purchases of Assets in the United States
+13
(8) US Purchases of Foreign Assets Abroad
-23
Capital Account
(9) Balance on Capital Account
+5
The table contains 2016 balance of payments data (+ and −) for the hypothetical nation of
Zabella. All figures are in billions of dollars. Zabella’s balance on capital and financial account
shows a
32.
(1) Goods Exports
+$200
(2) Balance on Capital Account
0
(3) Net Transfers
0
(4) Imports of Services
−100
(5) Net Investment Income
0
(6) US Purchases of Assets Abroad
−50
(7) Goods Imports
-250
(8) Foreign Purchases of Assets in the US
+150
(9) Exports of Services
+50
The plus items in the table are “export-type” entries and the minus items are “import-type”
entries in the balance of payments for the hypothetical country of Zippo. The current account
items for Zippo are
33.
(1) Goods Exports
+$200
(2) Balance on Capital Account
0
(3) Net Transfers
0
(4) Imports of Services
−100
(5) Net Investment Income
0
(6) US Purchases of Assets Abroad
−50
(7) Goods Imports
-250
(8) Foreign Purchases of Assets in the US
+150
(9) Exports of Services
+50
The plus items in the table are “export-type” entries and the minus items are “import-type”
entries in the balance of payments for the hypothetical country of Zippo. The financial account
items for Zippo are
41–18
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written consent of McGraw-Hill Education.
T o p i c : The Balance of Payments
Type: Table
34.
(1) Goods Exports
+$200
(2) Balance on Capital Account
0
(3) Net Transfers
0
(4) Imports of Services
−100
(5) Net Investment Income
0
(6) US Purchases of Assets Abroad
−50
(7) Goods Imports
-250
(8) Foreign Purchases of Assets in the US
+150
(9) Exports of Services
+50
The plus items in the table are “export-type” entries and the minus items are “import-type”
entries in the balance of payments for the hypothetical country of Zippo. Zippo has a
35.
(1) Goods Exports
+$200
(2) Balance on Capital Account
0
(3) Net Transfers
0
(4) Imports of Services
−100
(5) Net Investment Income
0
(6) US Purchases of Assets Abroad
−50
(7) Goods Imports
-250
(8) Foreign Purchases of Assets in the US
+150
(9) Exports of Services
+50
The plus items in the table are “export-type” entries and the minus items are “import-type”
entries in the balance of payments for the hypothetical country of Zippo. Zippo has a
36.
(1) Goods Exports
+$200
(2) Balance on Capital Account
0
(3) Net Transfers
0
(4) Imports of Services
−100
(5) Net Investment Income
0
(6) US Purchases of Assets Abroad
−50
(7) Goods Imports
-250
(8) Foreign Purchases of Assets in the US
+150
(9) Exports of Services
+50
The plus items in the table are “export-type” entries and the minus items are “import-type”
entries in the balance of payments for the hypothetical country of Zippo. Zippo has
41–20
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 41-02 Analyze the balance sheet the United States uses to account for the
international payments it makes and receives.
Test Bank: I
T o p i c : The Balance of Payments
Type: Table
37.
In the balance of payments of the United States, U.S. goods imports are recorded as a
38.
In the balance of payments of the United States, inflows of foreign currencies to the United
States are recorded as
39.
Which one of the following will not directly affect the U.S. balance on current account?