c.
The purchase of a Japanese computer by a U.S. corporation
d.
The purchase of a plane ticket from Australian Airlines by a U.S. resident
e.
The purchase of a German car by a U.S. resident
51. A U.S. citizen’s income from investment in foreign countries is _____ in the U.S. current account.
a.
recorded as a deficit
b.
recorded as a surplus
c.
recorded as a debit
d.
recorded as a credit
e.
not recorded
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
52. Which of the following transactions will be included in the financial account of the balance of payments of any
country?
a.
Travel and tourism expenses
b.
Import of goods
c.
Investment in stock
d.
Export of services
e.
Payment of insurance premium
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
53. Which of the following would be entered as a credit in the financial account of the United States?
a.
Purchase of U.S. Treasury bonds by Americans
b.
Purchase of U.S. Treasury bonds by foreigners
c.
Purchase of U.S. made cars by foreigners
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
d.
Income earned by the U.S. from tourism
e.
Purchase of foreign stocks by U.S. investors
54. The statistical discrepancy account:
a.
b.
c.
d.
e.
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
55. The statistical discrepancy account is also referred to as:
a.
omissions and errors.
b.
econometric discrepancy.
c.
statistical influence.
d.
human flaws.
e.
arbitrary human discrepancy.
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
56. Which of the following statements is incorrect with respect to the balance of payments?
a.
It constitutes a record of transactions between residents within one country.
b.
It consists of a current account, a capital account, and an account to record omissions and errors.
c.
Transactions that result in a demand for domestic currency are always entered as a credit.
d.
It must balance in the aggregate, but separate accounts can show deficits or surpluses.
e.
It constitutes a record of a country’s trade in goods and services and financial assets.
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
57. The net balance on the balance of payments accounts:
a.
always shows a surplus.
b.
always shows a deficit.
c.
is always zero.
d.
is either positive or negative.
e.
is arrived at without considering omissions and errors in transactions.
MACR.BOYE.16.28 – ch. 06, 3
United States – International Trade and Finance
The Balance of Payments
58. When economists talk about a balance of payments “deficit,” they refer to:
a.
a net balance in the balance of payments that is less than zero.
b.
a condition in which total credits exceed total debits in the balance of payments.
c.
a deficit in one of the sub-accounts of the balance of payments.
d.
a disequilibrium in the foreign exchange market.
e.
a net loss in the trade of international goods and services.
MACR.BOYE.16.28 – ch. 06, 3
United States – International Trade and Finance
The Balance of Payments
59. A deficit in a country’s current account means that:
a.
the country is running a net deficit in its financial account.
b.
the country is a net lender to the rest of the world.
c.
the country is running a net surplus in its financial account.
d.
the country will have a positive value of net exports.
e.
the domestic production is in excess of domestic spending.
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
60. Refer to Table 6.1. Compute the merchandise trade balance of Germany in 2011.
a.
–€800
b.
–€130
c.
–€40
d.
€40
e.
€130
Moderate
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
Application
61. Refer to Table 6.1. Calculate the current account balance for Germany for the year 2011.
a.
–€1,720
b.
€500
c.
–€870
d.
€784
e.
–€650
Challenging
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
62. Refer to Table 6.1. Compute the capital account balance for Germany.
Knowledge
New
a.
–€430
b.
–€800
c.
€180
d.
€500
e.
–€550
63. Refer to Table 6.1. The statistical discrepancy in the balance of payments accounts for Germany in the year 2011 is:
a.
€525.
b.
–€800.
c.
€250.
d.
–€125.
e.
€370.
Challenging
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
Application
Revised
64. A gift from the British prime minister to the American president would be classified as a _____ in the balance of
payments account.
a.
capital transfer
b.
capital receipt
c.
universal receipt
d.
unilateral transfer
e.
foreign aid
d
Moderate
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
Application
65. Suppose an economics professor receives a $10,000 royalty check from a foreign publishing company and deposits the
amount in a local bank. This transaction would be recorded as:
a.
a $10,000 credit entry in the domestic services account.
b.
a $20,000 debit entry in the domestic capital account.
d
Challenging
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
Application
c.
a $20,000 debit entry in the domestic capital account.
d.
a $10,000 credit entry in the domestic capital account.
e.
a $10,000 debit entry in the domestic services account.
66. The _____ account reflects the movement of goods and services into and out of the country. The _____ account
reflects the flow of financial assets into and out of the country.
a.
universal transfer; financial
b.
universal transfer; current
c.
current; financial
d.
capital; current
e.
capital; financial
MACR.BOYE.16.28 – ch. 06, 3
United States – International Trade and Finance
The Balance of Payments
67. In the 1980s, the U.S. current account deficit was financed by:
a.
large outflows of domestic capital to other countries.
b.
large inflows of capital from private foreign investment in the United States.
c.
loans made by U.S. residents to the government.
d.
large inflows of foreign government capital.
e.
the Tax Reform Act of 1986, which increased income taxes for the wealthy.
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
68. Identify the correct statement.
a.
The United States was an international net debtor from the end of World War I until the mid-1980s.
b.
The United States was an international net creditor from the end of World War I until the mid-1980s.
c.
In 1945, the United States became an international net debtor for the first time in almost 70 years.
d.
In 1985, the United States became an international net creditor for the first time in almost 70 years.
e.
The net creditor status of the United States has grown steadily since 1985.
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
69. A country that is running a current account deficit will have:
a.
zero net exports.
b.
zero investments.
c.
negative net investments.
d.
positive net exports.
e.
negative net exports.
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
70. Which of the following is true of a net debtor nation?
a.
It experiences a trade surplus for five consecutive years.
b.
It experiences a trade deficit for five consecutive years.
c.
It owes more to the rest of the world than it is owed.
d.
It owes less to the rest of the world than it is owed.
e.
It experiences persistent current account surplus.
MACR.BOYE.16.28 – ch. 06, 3
United States – International Trade and Finance
The Balance of Payments
71. When the equation X = GDP – C- I – G yields a negative X, it represents a situation in which the country:
a.
experiences runaway inflation.
b.
experiences robust GDP growth.
c.
experiences a huge budget deficit.
d.
borrows to cover the difference between production and spending.
e.
lends to cover the difference between production and spending.
MACR.BOYE.16.28 – ch. 06, 3
MACR.BOYE.16.28 – ch. 06, 3
United States – International Trade and Finance
The Balance of Payments
72. Which of the following is true of a current account surplus?
a.
A country that is running a current account surplus will have negative net exports.
b.
A current account surplus is consistent with domestic spending being in excess of domestic production.
c.
A current account surplus means that a country is also running a net surplus in its financial account.
d.
A country can have a current account surplus only if it exports more services as compared to goods.
e.
A country that is running a current account surplus buys more bonds from the rest of the world as compared to
what it sells.
Moderate
MACR.BOYE.16.06.03 – ch. 06, 3
United States – Analytic – BB-Legal
United States – International Trade and Finance
The Balance of Payments
Knowledge
New
73. Tourism requires the actual movement of currency notes while investment in international bank deposits does not.
a.
True
b.
False
True
Easy
MACR.BOYE.16.26 – ch. 06, 1
United States – Analytic – BB-Legal
United States – International Trade and Finance
The Foreign Exchange Market
Knowledge
74. Exchange rates allow for a comparison of the trade values of goods and services across countries.
a.
True
b.
False
True
Moderate
MACR.BOYE.16.26 – ch. 06, 1
United States – Analytic – BB-Legal
United States – International Trade and Finance
The Foreign Exchange Market
Knowledge
75. Suppose you are a U.S. importer purchasing coffee from Guatemala at a dollar price of $10,000. If the bank charges
$0.12 per quetzal, you would have to buy 120,000 quetzals to settle the account with the Guatemalan exporter.
a.
True
b.
False
False
United States – Reflective Thinking
The Balance of Payments
Application
76. The hours of trading of North American markets overlap with those of both the European markets and the Asian
markets.
a.
True
b.
False
False
Moderate
United States – International Trade and Finance
Global Business Insight – Active Trading Around the World
Knowledge
77. The euro is the common currency of all European countries.
a.
True
b.
False
False
Easy
Global Business Insight – The Euro
Knowledge
78. The euro began trading in January 1999.
a.
True
b.
False
True
Easy
United States – International Trade and Finance
Global Business Insight – The Euro
Knowledge
79. All euro coins circulating in the different countries of the European Union have the same design.
a.
True
b.
False
False
MACR.BOYE.16.26 – ch. 06, 1
Challenging
MACR.BOYE.16.26 – ch. 06, 1
The Foreign Exchange Market
Application
80. The euro coins can be spent only in the countries where they are made, because one side of the coin has an image that
is individualized for each of the countries of the European Union.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.26 – ch. 06, 1
Global Business Insight – The Euro
Knowledge
81. If Michelle can buy a woolen jacket for 40 yuan in China, and Rebecca pays $40 for the same jacket in the U.S., it
implies that the exchange rate between these two nations is 10 yuan = $1.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.26 – ch. 06, 1
The Foreign Exchange Market
Application
Revised
82. An increase in the dollar price of foreign currency constitutes an appreciation of the U.S. currency.
a.
True
b.
False
False
Moderate
MACR.BOYE.16.27 – ch. 06, 2
United States – Reflective Thinking
The Foreign Exchange Market
Application
83. Other things equal, the currency price of U.S. dollars in terms of foreign currency is negatively related to foreign
demand for U.S. goods and services.
a.
True
b.
False
Moderate
Knowledge
84. A stereo system in Mexico costs 3,200 Mexican pesos. If the dollar price of one Mexican pesos is $0.11, then the U.S.
dollar value of the same stereo system is $352.
a.
True
b.
False
True
Challenging
MACR.BOYE.16.27 – ch. 06, 2
The Foreign Exchange Market
Application
85. If the U.S. dollar price of one Japanese yen was $0.009 in 1997 and $0.011 in 2001, then the reciprocal exchange rate
adjusted from $1 = ¥111.1 in 1997 to $1 = ¥90.9 in 2001. This implies that over this time period, the U.S. dollar
experienced a depreciation relative to the Japanese yen.
a.
True
b.
False
True
Challenging
MACR.BOYE.16.27 – ch. 06, 2
United States – Reflective Thinking
The Foreign Exchange Market
Application
86. If the dollar price of the yen is 1.39, the reciprocal exchange rate is 1 yen = $0.39.
a.
True
b.
False
False
Easy
MACR.BOYE.16.06.02 – ch. 06, 2
United States – International Trade and Finance
The Foreign Exchange Market
Knowledge
New
87. When the domestic currency depreciates, foreign demand for domestic goods increases.
a.
True
b.
False
True
MACR.BOYE.16.27 – ch. 06, 2
The Foreign Exchange Market
Application
88. The traders in the foreign exchange market need to interact personally while exchanging currencies.
a.
True
b.
False
False
Easy
MACR.BOYE.16.28 – ch. 06, 3
United States – International Trade and Finance
The Foreign Exchange Market
Knowledge
89. If a bank is selling Russian rubles (RUB) for $0.16, then the implied ruble price of the dollar is RUB 6.25.
a.
True
b.
False
True
Easy
MACR.BOYE.16.28 – ch. 06, 3
The Foreign Exchange Market
Application
90. A country that experiences a large deficit in the merchandise trade account should always aim at eliminating this trade
deficit by adopting strict foreign trade policies.
a.
True
b.
False
False
MACR.BOYE.16.28 – ch. 06, 3
United States – Reflective Thinking
The Balance of Payments
Application
91. A trade deficit experienced by a country during a year generally signals the poor health of the economy.
a.
True
b.
False
Easy
Easy
MACR.BOYE.16.27 – ch. 06, 2
The Foreign Exchange Market
Application
Revised
92. Double-entry bookkeeping requires that the debit and credit entries for any transaction must balance.
a.
True
b.
False
True
Easy
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
Knowledge
93. In the balance of payment accounts, transactions that bring in money are treated as debit and the transactions that take
away money are treated as credits.
a.
True
b.
False
False
Easy
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
Knowledge
Revised
94. Foreign aid, royalties earned abroad, and long-term capital flows are part of the current account.
a.
True
b.
False
False
Moderate
United States – International Trade and Finance
The Balance of Payments
Knowledge
95. The balance of trade account reflects only transactions associated with the international trade of goods.
a.
True
b.
False
True
MACR.BOYE.16.28 – ch. 06, 3
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
Application
96. The capital account is the sum of the merchandise, services, and unilateral transfers accounts.
a.
True
b.
False
False
Easy
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
Knowledge
97. When economists talk about a “balance of payments” deficit, they refer to a condition in which total debits exceed
total credits in the balance of payments account.
a.
True
b.
False
False
Easy
MACR.BOYE.16.28 – ch. 06, 3
The Balance of Payments
Knowledge
98. When imports of goods exceed exports of goods, the financial account shows a deficit.
a.
True
b.
False
False
Easy
MACR.BOYE.16.06.03 – ch. 06, 3
United States – International Trade and Finance
The Balance of Payments
Knowledge
New
99. A country that shows a deficit in its financial account is a net creditor to the rest of the world.
a.
True
b.
False
True
MACR.BOYE.16.06.03 – ch. 06, 3
Knowledge
Revised