1. On the balance-of-payments statements, merchandise imports are classified in the:
a.
Current account
b.
Capital account
c.
Unilateral transfer account
d.
Official settlements account
2. The balance of international indebtedness is a record of a country’s international:
a.
Investment position over a period of time
b.
Investment position at a fixed point in time
c.
Trade position over a period of time
d.
Trade position at a fixed point in time
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3. Which balance-of-payments item does not directly enter into the calculation of the U.S. gross domestic product?
a.
Merchandise imports
b.
Shipping and transportation receipts
c.
Direct foreign investment
d.
Service exports
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4. Which of the following is considered a capital inflow?
a.
A sale of U.S. financial assets to a foreign buyer
b.
A loan from a U.S. bank to a foreign borrower
c.
A purchase of foreign financial assets by a U.S. buyer
d.
A U.S. citizen’s repayment of a loan from a foreign bank
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5. Which of the following would call for inpayments to the United States?
a.
b.
c.
d.
NATIONAL STANDARDS:
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6. In a country’s balance of payments, which of the following transactions are debits?
a.
Domestic bank balances owned by foreigners are decreased
b.
Foreign bank balances owned by domestic residents are decreased
c.
Assets owned by domestic residents are sold to nonresidents
d.
Securities are sold by domestic residents to nonresidents
NATIONAL STANDARDS:
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STATE STANDARDS:
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7. Which of the following is classified as a credit in the U.S. balance of payments?
a.
U.S. exports
b.
U.S. gifts to other countries
c.
A flow of gold out of the U.S.
d.
Foreign loans made by U.S. companies
NATIONAL STANDARDS:
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STATE STANDARDS:
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Double-Entry Accounting
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Table 10.1 gives hypothetical figures for U.S. International Transactions.
NATIONAL STANDARDS:
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Table 10.1. U.S. International Transactions
Amount
Transaction
(billions of dollars)
Merchandise imports
110
Military transactions, net
-5
Remittances, pensions, transfers
–20
U.S. private assets abroad
–50
Merchandise exports
115
Investment income, net
15
U.S. government grants
-5
(excluding military)
Foreign private assets in the U.S.
25
Compensation of employees
-5
Allocation of SDRs
5
Travel and transportation receipts, net
20
8. Referring to Table 10.1, the goods and services balance equals:
a.
$5 billion
b.
$15 billion
c.
$20 billion
d.
$25 billion
9. Referring to Table 10.1, the current account balance equals:
a.
$5 billion
b.
$10 billion
c.
$15 billion
d.
$20 billion
a
Moderate
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10. Unlike the balance of payments, the balance of international indebtedness indicates the international:
a.
Investment position of a country at a given moment in time
b.
Investment position of a country over a one-year period
c.
Trade position of a country at a given moment in time
c
Moderate
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d.
Trade position of a country over a one-year period
11. Which of the following indicates the international investment position of a country at a given moment in time?
a.
The balance of payments
b.
The capital account of the balance of payments
c.
The current account of the balance of payments
d.
The balance of international indebtedness
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12. Concerning the U.S. balance of payments, which account is defined in essentially the same way as the net export of
goods and services, which comprises part of the country’s gross domestic product?
a.
Merchandise trade account
b.
Goods and services account
c.
Current account
d.
Capital account
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13. If an American receives dividends from the shares of stock she or he owns in Toyota, Inc., a Japanese firm, the
transaction would be recorded on the U.S. balance of payments as a:
a.
Capital account debit
b.
Capital account credit
c.
Current account debit
d.
Current account credit
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14. If the United States government sells military hardware to Saudi Arabia, the transaction would be recorded on the U.S.
balance of payments as a:
a.
Current account debit
b.
Current account credit
c.
Capital account debit
d.
Capital account credit
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U.S. Balance of Payments
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15. The U.S. balance of trade is determined by:
a.
Exchange rates
b.
Growth of economies overseas
c.
Relative prices in world markets
d.
All of the above
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16. U.S. military aid granted to foreign countries is entered in the:
a.
Merchandise trade account
b.
Capital account
c.
Current account
d.
Official settlements account
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17. If the U.S. faces a balance-of-payments deficit on the current account, it must run a surplus on:
a.
The official settlements account
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U.S. Balance of Payments
BLOOM’S: Comprehension
b.
The capital account
c.
Either the official settlements account or the capital account
d.
Both the official settlements account and the capital account
18. The current account of the U.S. balance of payments does not include:
a.
Investment income
b.
Merchandise exports and imports
c.
The sale of securities to foreigners
d.
Unilateral transfers
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19. The U.S. has a balance of trade deficit when its:
a.
Merchandise exports exceed its merchandise imports
b.
Merchandise imports exceed its merchandise exports
c.
Goods and services exports exceed its goods and services imports
d.
Goods and services imports exceed its goods and services exports
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20. The value to American residents of income earned from overseas investments shows up in which account in the U.S.
balance of payments?
a.
Current account
b.
Trade account
c.
Unilateral transfers account
d.
Capital account
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Table 10.2. International Investment Position of the United States
U.S. assets abroad
U.S. government assets
$800 billion
U.S. private assets
$200 billion
Foreign assets in the U.S.
Foreign official assets
$600 billion
Foreign private assets
$300 billion
21. Consider Table 10.2. The U.S. balance of international indebtedness suggests that the United States is a net:
a.
Debtor
b.
Creditor
c.
Spender
d.
Exporter
Challenging
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22. For the first time since World War I, in 1985 the United States became a net international:
a.
Exporter
b.
Importer
c.
Debtor
d.
Creditor
c
Moderate
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23. A country that is a net international debtor initially experiences:
a.
An augmented savings pool available to finance domestic spending
b.
A higher interest rate, which leads to lower domestic investment
c.
A loss of funds to trading partners overseas
d.
A decrease in its services exports to other countries
a
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24. Credit (+) items in the balance of payments correspond to anything that:
a.
Involves receipts from foreigners
b.
Involves payments to foreigners
c.
Decreases the domestic money supply
d.
Increases the demand for foreign exchange
ANSWER:
a
POINTS:
1
DIFFICULTY:
Easy
NATIONAL STANDARDS:
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STATE STANDARDS:
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Double-Entry Accounting
KEYWORDS:
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25. Debt (-) items in the balance of payments correspond to anything that:
a.
Involves receipts from foreigners
b.
Involves payments to foreigners
c.
Increases the domestic money supply
d.
Decreases the demand for foreign exchange
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
NATIONAL STANDARDS:
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STATE STANDARDS:
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TOPICS:
Double-Entry Accounting
KEYWORDS:
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26. When all of the debit or credit items in the balance of payments are combined:
a.
Merchandise imports equal merchandise exports
b.
Capital imports equal capital exports
c.
Services exports equal services imports
d.
The total surplus or deficit equals zero
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
NATIONAL STANDARDS:
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STATE STANDARDS:
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TOPICS:
Balance-of-Payments Structure
KEYWORDS:
BLOOM’S: Comprehension
POINTS:
1
DIFFICULTY:
Challenging
NATIONAL STANDARDS:
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STATE STANDARDS:
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TOPICS:
What Does a Current Account Deficit (Surplus) Mean?
KEYWORDS:
BLOOM’S: Comprehension
27. In the balance of payments, the statistical discrepancy is used to:
a.
Ensure that the sum of all debits matches the sum of all credits
b.
Ensure that trade imports equal the value of trade exports
c.
Obtain an accurate account of a balance-of-payments deficit
d.
Obtain an accurate account of a balance-of-payments surplus
28. All of the following are credit items in the balance of payments, except:
a.
Investment inflows
b.
Merchandise exports
c.
Payments for American services to foreigners
d.
Private gifts to foreign residents
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29. All of the following are debit items in the balance of payments, except:
a.
Capital outflows
b.
Merchandise exports
c.
Private gifts to foreigners
d.
Foreign aid granted to other nations
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30. The role of ____ is to direct one nation’s savings into another nation’s investments:
a.
Merchandise trade flows
b.
Services flows
c.
Current account flows
d.
Capital flows
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31. When a country realizes a deficit on its current account:
a.
Its net foreign investment position becomes positive
b.
It becomes a net demander of funds from other countries
c.
It realizes an excess of imports over exports on goods and services
d.
It becomes a net supplier of funds to other countries
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What Does a Current Account Deficit (Surplus) Mean?
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32. Reducing a current account deficit requires a country to:
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
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33. Reducing a current account deficit requires a country to:
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
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What Does a Current Account Deficit (Surplus) Mean?
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34. Reducing a current account surplus requires a country to:
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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
35. Concerning a country’s business cycle, rapid growth of production and employment is commonly associated with:
a.
Large or growing trade deficits and current account deficits
b.
Large or growing trade deficits and current account surpluses
c.
Small or shrinking trade deficits and current account deficits
d.
Small or shrinking trade deficits and current account surpluses
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What Does a Current Account Deficit (Surplus) Mean?
36. The burden of a current account deficit would be the least if a nation uses what it borrows to finance:
a.
Unemployment compensation benefits
b.
Social Security benefits
c.
Expenditures on food and recreation
d.
Investment on plant and equipment
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What Does a Current Account Deficit (Surplus) Mean?
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37. Concerning a country’s business cycle, ____ is commonly associated with large or growing current account deficits:
a.
Rapid growth rates of production and employment
b.
Slow growth rates of production and employment
c.
Falling interest rates on government securities
d.
Falling interest rates on corporate securities
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38. According to researchers at the Federal Reserve, the loss of jobs associated with a deficit in the current account tends
to be:
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
a
Moderate
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Table 10.3 shows hypothetical transactions, in billions of U.S. dollars, that took place during a year.
Table 10.3. International Transactions of the United States
Amount
(billions of dollars)
Transaction
Allocation of SDRs
10
Changes in U.S. assets abroad
100
Statistical discrepancy
–15
Merchandise imports
–400
Payments on foreign assets in U.S.
–20
Remittances, pensions, transfers
–60
Travel and transportation receipts, net
30
Military transactions, net
–10
Investment income, net
100
Merchandise exports
350
U.S. government grants (excluding military)
–20
Changes in foreign assets in the U.S.
190
Other services, net
80
Receipts on U.S. investments abroad
30
Compensation of employees
–10
39. Refer to Table 10.3. The merchandise-trade balance registered a deficit of $50 billion.
a.
True
b.
False
True
Challenging
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40. Refer to Table 10.3. The services balance registered a surplus of $100 billion.
a.
True
b.
False
True
Challenging
Balance-of-Payments Structure
41. Refer to Table 10.3. The goods-and-services balance registered a surplus of $50 billion.
a.
True
b.
False
True
Challenging
Balance-of-Payments Structure
42. Refer to Table 10.3. The unilateral-transfers balance registered a deficit of $40 billion.
a.
True
b.
False
False
Challenging
Balance-of-Payments Structure
43. Refer to Table 10.3. The current-account balance registered a surplus of $30 billion.
a.
True
b.
False
False
Challenging
Balance-of-Payments Structure
Balance-of-Payments Structure
44. Refer to Table 10.3. The “net exports” component of the U.S. gross domestic product registered $-110 billion.
a.
True
b.
False
45. Refer to Table 10.3. The payments data suggest that the United States was a “net demander” of $30 billion from the
rest of the world.
a.
True
b.
False
False
Challenging
Balance-of-Payments Structure
46. The balance of payments refers to the stock of trade and investment transactions that exists at a particular point in
time.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
47. Referring to the balance-of-payments statement, an international transaction refers to the exchange of goods, services,
and assets between residents of one country and those abroad.
a.
True
b.
False
True
Balance-of-Payments Structure
False
Challenging
Balance-of-Payments Structure