48. The balance of payments includes international transactions of households and businesses, but not government.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
49. Because the balance of payments utilizes double-entry accounting, merchandise exports will always be in balance with
merchandise imports.
a.
True
b.
False
False
Moderate
50. On the U.S. balance-of-payments statement, the following transactions are credits, leading to the receipt of dollars
from foreigners: merchandise exports, transportation receipts, income received from investments abroad, and investments
in the United States by foreign residents.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
51. On the U.S. balance of payments, the following transactions are debits, leading to payments to foreigners:
merchandise imports, travel expenditures, gifts to foreign residents, and overseas investments by U.S. residents.
a.
True
b.
False
True
Moderate
52. 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.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
53. An increase in import restrictions by the U.S. government tends to promote a merchandise-trade surplus.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
54. 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.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
55. On the balance-of-payments statement, dividend and interest income are classified as capital-account transactions.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
56. A surplus on Germany’s goods-and-services balance indicates that Germany has sold more goods and services to
foreigners than it has bought from them over a one-year period.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
57. The merchandise-trade account on the balance-of-payments statement is defined the same way as “net exports” which
constitutes part of the nation’s gross domestic product.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
58. A positive balance on the goods-and-services account of the balance of payments indicates an excess of exports over
imports which must be added to the nation’s gross domestic product.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
59. For the United States, merchandise trade has generally constituted the largest portion of its goods-and-services
account.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
60. Unilateral transfers refer to two-sided transactions, reflecting the movement of goods and services in one direction
with corresponding payments in the other direction.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
61. Unilateral transfers consist of private-sector transfers, such as church contributions to alleviate starvation in Africa, as
well as governmental transfers, such as foreign aid.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
62. Current-account transactions include direct foreign investment, purchases of foreign government securities, and
commercial bank loans made abroad.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
63. On the U.S. balance-of-payments statement, a capital inflow would occur if a Swiss resident purchases the securities
of the U.S. government.
a.
True
b.
False
True
Moderate
64. If Toyota Inc. of Japan builds an automobile assembly plant in the United States, the Japanese capital account would
register an outflow.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
65. If Bank of America receives repayment for a loan it made to a Mexican firm, the U.S. capital account would register
an inflow.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
66. On the balance-of-payments statement, a capital inflow can be likened to the import of goods and services.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
67. 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.
a.
True
b.
False
True
Balance-of-Payments Structure
68. If the current account of the balance of payments registers a deficit, the capital account registers a surplus, and vice
versa.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
69. Concerning the balance of payments, a current-account surplus means an excess of exports over imports of goods,
services, investment income, and unilateral transfers.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
70. If a country realizes a current-account deficit in its balance of payments, it becomes a net supplier of funds to the rest
of the world.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
71. Concerning the balance of payments, a current-account deficit results in a worsening of a country’s net foreign
investment position.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
72. In the balance-of-payments statement, statistical discrepancy is treated as part of the merchandise trade account
because merchandise transactions are generally the most frequent source of error.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
73. Because a large number of international transactions fail to get recorded, statisticians insert a residual, known as
statistical discrepancy, to ensure that total debits equal total credits.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
74. Concerning the balance of payments, the goods-and-services balance is commonly referred to as the “trade balance”
by the news media.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
75. Since the 1970s, the merchandise trade account of the U.S. balance of payments has registered deficit.
a.
True
b.
False
Moderate
Balance-of-Payments Structure
76. Although the United States has realized merchandise trade deficits since the early 1970s, its goods-and-services
balance has always registered surplus.
a.
True
b.
False
False
Moderate
77. In the past two decades, the U.S. services balance has generally registered surplus.
a.
True
b.
False
True
Easy
78. The U.S. unilateral-transfers balance has consistently registered surplus in the past two decades.
a.
True
b.
False
False
Easy
79. Because the balance of payments is a record of the economic transactions of a country over a period of time, it is a
“flow” concept.
a.
True
b.
False
True
Moderate
80. 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.
a.
True
b.
False
True
Moderate
81. 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.
a.
True
b.
False
False
Moderate
82. By the mid-1980s, the United States had evolved from the status of a net-creditor nation to a net-debtor nation in its
balance of international indebtedness.
a.
True
b.
False
True
Moderate
83. 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.
True
Moderate
Balance-of-Payments Structure
a.
True
b.
False
84. 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.
a.
True
b.
False
True
Moderate
85. The official reserve assets of the United States consist of holdings of gold and foreign corporate securities.
a.
True
b.
False
False
Moderate
86. That U.S. importers purchase bananas from Brazil constitutes a debit transaction on the U.S. balance of payments.
a.
True
b.
False
True
Moderate
87. That German investors collect interest income on their holdings of U.S. Treasury bills constitutes a credit transaction
False
Moderate
on the U.S. balance of payments.
a.
True
b.
False
88. That U.S. charities donate funds to combat starvation in Africa constitutes a debit transaction on the U.S. balance of
payments.
a.
True
b.
False
True
Moderate
89. To reduce a current account deficit, a country should either decrease the budget deficit of its government or reduce
investment spending relative to saving.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
90. Most economists belief that in the 1980s, a massive outflow of capital caused a current account deficit for the United
States.
a.
True
b.
False
False
Moderate
False
Moderate
91. A current account deficit for the United States necessarily reduces the standard of living for American households.
a.
True
b.
False
92. Rapid growth of production and employment is commonly associated with large or growing trade surpluses and
current account surpluses.
a.
True
b.
False
False
Moderate
Balance-of-Payments Structure
93. Often, countries realizing rapid economic growth rates possess long-run current account deficits.
a.
True
b.
False
True
Moderate
Balance-of-Payments Structure
94. For the United States, a consequence of its current account deficit is a growing foreign ownership of the capital stock
of the United States and a rising fraction of U.S. income that must be diverted abroad in the form of interest and dividends
to foreigners.
a.
True
b.
False
True
Moderate
False
Moderate
95. Most economists contend that any reduction in the current account deficit is better achieved through increased national
saving than through reduced domestic investment.
a.
True
b.
False
96. What are the components of the current account of the balance of payments?
Moderate
Balance-of-Payments Structure
97. Concerning the balance of international indebtedness, when is a country a net creditor or a net debtor?
Moderate
98. 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?
Moderate
99. What does a current account deficit mean?
True
Moderate
Balance-of-Payments Structure
