Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
1. U.S. exports create a:
2. U.S. imports represent two flows:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
3. U.S. businesses are demanders of foreign currencies because they need them to:
4. French and German farmers wanting to buy equipment from an American manufacturer
based in the U.S. will be:
5. U.S. imports:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
6. If a financial portfolio manager in the U.S. buys British company stocks in the London
Stock Exchange, this would involve:
7. The purchase of a British Rolls-Royce by a U.S. citizen would result in all of the following
except a(n):
8. U.S. exports of computers, aircraft, and chemicals create a:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
9. Which of the following statements about the financing of international trade is correct?
10. A nation’s balance of trade on goods is equal to its exports of goods less its imports of:
11. A nation’s current account balance is equal to its exports less its imports of:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
12. The current account on a nation’s balance of payments statement includes all of the
following except:
13. Which transaction represents a debit in the current account section of the U.S. balance of
payments?
14. When a Japanese company buys a U.S. software company, this transaction will be a:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
15. When a U.S. importer buys 100,000 pairs of pants from a Hong Kong company, this
transaction will be a:
16. When a U.S. agribusiness sells 10,000 units of cow vaccine to a company in France, this
transaction will be a:
17. Which of the following transactions represents a credit on the financial account of the
U.S. balance of payments?
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
18. When a U.S. company purchases a factory in Singapore, this will be a:
19. Which of the following shows the net difference between how much Americans forgave in
debts owed to them by foreigners compared with how much foreigners forgave debts owed to
them by Americans?
20. Which one of the following is part of the financial account on the U.S. balance of
payments?
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
21. Which is an item in the current account of the balance of payments for the United States?
The purchase of:
22. Remittances of Mexican workers in the U.S. to their families in Mexico are included in
the U.S. balance of payments as a debit in the section on:
23. Which of the following appears as a positive item on the balance of payments account for
the United States?
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
24. In one year the United States had a current account deficit of $161 billion. The balance on
the capital account was -$5 billion. What was the balance on the financial account?
25. In the Balance of Payments statement, a current account surplus will be matched by a:
26. Official reserves used to achieve a balance of payments between nations engaging in
international trade are held by:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
27. The settling of any net deficit in the combined current, and capital and financial accounts
is done with:
28. If there is a small surplus in the combined current account plus capital and financial
account for a certain year, then to make the two accounts balance there will be:
29. Which of the following would be an indication that a nation has a balance of payments
deficit?
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
21–11
30. A trade deficit means a net:
31. A nation’s annual balance of payments statement must always balance because:
The following table contains hypothetical data for the U.S. balance of payments in a year.
Answer the question on the basis of these data. All figures are in billions of dollars.
U.S. goods exports +$390
U.S. goods imports -498
U.S. service exports +133
U.S. service imports -107
Net investment income +12
Net transfers -22
Capital account -5
Foreign purchases of U.S. assets +156
U.S. purchases of foreign assets -59
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
32. Refer to the above table. The data indicate that there was a trade:
33. Refer to the above table. The balance of trade in goods and services was:
34. Refer to the above table. The balance on the current account was a:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
35. Refer to the above table. The figure for net transfers indicates that the United States:
36. Refer to the above table. What does the figure for net investment income indicate?
37. Refer to the above table. The balance on the financial account was a:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
38. Refer to the above table. If there was an inpayment of $7 billion in official reserves to the
capital and financial account that year, the United States experienced a balance-of-payments:
Answer the question on the basis of the following balance of payments data for the
hypothetical nation of Alfina. All figures are in billions of dollars.
(1) Goods exports +$220
(2) Goods imports -328
(3) Exports of services +54
(4) Imports of services –55
(5) Net investment income +18
(6) Net transfers -11
(7) Capital account -1
(8) Foreign purchases of Alfina assets+124
(9) Alfina purchases of foreign assets -21
39. Refer to the above table. Alfina’s balance of trade in goods and services shows a:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
21–15
40. Refer to the above table. Alfina’s balance on the current account shows a:
41. Refer to the above table. Alfina’s balance on the capital and financial account is a:
The following table contains data for the U.S. balance of payments in a prior year. Answer
the question on the basis of this information. All figures are in billions of dollars.
U.S. goods exports +$793
U.S. goods imports -1573
U.S. exports of service +280
U.S. imports of services -222
Net investment income +5
Net transfers -81
Capital account -5
Foreign purchases of assets in the U.S. +1198
U.S. purchases of foreign assets -395
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
42. Refer to the above table. There was a:
43. Refer to the above table. The data indicate that Americans:
44. By how much did Americans forgive debt owed to them by foreigners than foreigners
forgave debt owed to them by Americans?
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
45. Foreign exchange rates refer to the:
46. To Americans buyers, there is a decrease in the relative prices of Japanese goods when
the:
47. If an American can purchase 40,000 British pounds for $90,000, the dollar rate of
exchange for the pound is:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
48. If a Japanese importer could buy $1000 U.S. for 122,000 yen, the rate of exchange for one
dollar would be:
49. If the exchange rate is $1 = 0.7841 euro, then a French DVD priced at 20 euros would cost
to an American buyer (excluding taxes and other fees):
50. If a European importer can buy $10,000 for 11,100 euros, the exchange rate for the euro
is:
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
51. An increase in the dollar price of the British pounds will:
52. In one year the dollar would buy 162 Japanese yen, but ten years later, it would buy only
123 yen. Relative to the yen, the value of the dollar:
53. Assume an exchange rate of $1 = .60 British pounds. A U.S. product sells in Britain for 18
pounds. By what percentage will dollar revenues change if the dollar price of a pound falls to
.50 pounds?
Chapter 21 – The Balance of Payments, Exchange Rates, and Trade Deficits
54. If the Canadian dollar price of United States dollars increases from C$.80 to C$1.00, it
can be concluded that:
55. In equilibrium, if $1 = 0.5 pounds sterling and 1 pound sterling = 40 Swiss francs, the
exchange rate between dollar and franc will be:
56. When the exchange rate between pounds and dollars moves from $2 = 1 pound to $1 = 1
pound, we say that the dollar has: