37) An official settlements account balance of -$5,000 means
A) official reserves of foreign currency increased by $5,000.
B) official reserves of foreign currency decreased by $5,000.
C) the country is exporting more than it is importing.
D) the country is importing more than it is exporting.
38) To pay for a current account deficit, a country can
A) borrow money from abroad.
B) lend money abroad.
C) increase official reserves to cover the shortfall.
D) transfer money from the capital account to the official settlements account.
39) If a country is importing more than they are exporting, the current account will have a
________ balance and the capital and financial account will have a ________ balance.
A) negative; positive
B) negative; negative
C) positive; negative
D) positive; positive
40) If foreign investment in the United States exceeds U.S. investment abroad, there is a
________; and when U.S. investment abroad exceeds foreign investment in the United States,
there is ________.
A) current account surplus; a current account deficit
B) current account surplus; an official accounts surplus
C) capital and financial account surplus; a capital and financial account deficit
D) capital and financial account deficit; a capital and financial account surplus
41) When there is a current account deficit and the official settlements account equals 0, then
A) exports exceed imports for the country.
B) the country is an exporter of capital.
C) the capital and financial account has a surplus.
D) the country has a budget surplus.
42) If U.S. imports increase, the sum of the balance of payments accounts (the sum of the current
account plus capital and financial account plus official settlements account)
A) becomes negative.
B) becomes positive.
C) becomes negative or positive depending on the government budget deficit or surplus.
D) does not change.
43) The sum of the current account, capital and financial account, and official settlements
account is
A) a positive number if the country has a trade surplus.
B) a negative number if the country has a trade deficit.
C) positive or negative depending on whether the domestic exchange rate is appreciating or
depreciating.
D) always equal to zero.
44) Suppose the current account of a country is in balance and the official settlements account
equals 0. A new transaction occurs so that the current account is now in surplus, but the official
settlements account does not change. From this we know that
A) the balance of trade is now in surplus.
B) the government is running a budget deficit.
C) the capital and financial account is now in deficit.
D) the government must make official reserve transactions.
45) If the current account balance is $30 billion, and the capital and financial account balance is
$35 billion, then the official settlements account balance is ________ billion, and the official
reserves ________.
A) $5 billion; increase
B) -$5 billion; increase
C) $5 billion; decrease
D) -$5 billion; decrease
46) If the current account balance is -$100 billion and the capital and financial account balance is
$80 billion, then the official settlement account balance is
A) -$20 billion.
B) $20 billion.
C) always 0.
D) impossible to determine with the information given.
47) If the U.S. current account balance is -$500 billion and the capital and financial account
balance is +$510 billion
A) the U.S. official settlements account balance is $10 billion.
B) the U.S. government’s holdings of foreign currency increases by $10 billion.
C) foreign investment in the United States is smaller than the U.S. investment abroad.
D) U.S. exports are greater than U.S. imports.
48) If the current account has a negative balance of $100 and the capital and financial account
has a positive balance of $80, there will be ________ in official reserves of ________.
A) a decrease; $20
B) an increase; $20
C) an increase; $180
D) a decrease; $180
49) If the current account has a positive balance of $100 and the capital and financial account has
a negative balance of $90, there will be ________ in official reserves of ________.
A) a decrease; $10
B) an increase; $10
C) an increase; $190
Item
Billions of dollars
Exports of goods
1000
Imports of goods
-665
Exports of services
410
Imports of services
-590
Net interest income
0
Net transfers
-15
U.S. investment abroad
-600
Foreign investment in
the United States
400
Official settlements
account
60
50) The data in the table above are the U.S. balance of payments. The current account balance is
A) $140 billion.
B) $155 billion.
C) $170 billion.
D) -$45 billion.
51) The data in the table above are the U.S. balance of payments. The data show that
A) the United States has a current account surplus.
B) the United States has a capital and financial account surplus.
C) The United States loaned $400 billion to the rest of the world.
D) Both answers A and B are correct.
52) The data in the table above are the U.S. balance of payments. The capital and financial
account balance is
A) $0.
B) -$80 billion.
C) -$200 billion.
D) +$200 billion.
53) The data in the table above are the U.S. balance of payments. The sum of the current account
plus capital and financial account plus official settlements account is equal to
A) $0.
B) -$335 billion.
C) $140 billion.
D) -$60 billion.
Item
Billions of dollars
Imports of goods and
services
-750
Exports of goods and
services
1,000
Net interest income
-50
Net transfers
-50
U.S. investment abroad
-350
Foreign investment in
the United States
200
54) The data in the table above are the U.S. balance of payments. What is the current account
balance?
A) $0
B) $150 billion
C) -$100 billion
D) -$150 billion
55) The data in the table above are the U.S. balance of payments. What is the capital and
financial account balance?
A) $0
B) $150 billion
C) -$350 billion
D) -$150 billion
56) The data in the table above are the U.S. balance of payments. If there is no statistical
discrepancy, what is the balance in the official settlements account?
A) $150 billion
B) -$150 billion
C) $50 billion
D) $0
Item
Billions of dollars
Exports of goods and
services
635
Imports of goods and
services
-555
Net interest income
-18
Net transfers
22
Urland’s investment
abroad
-467
Foreign investment in
Urland
321
57) The above table shows some of the balance of payments accounts for Urland. What is
Urland’s balance on the current account?
A) $80 billion
B) $62 billion
C) $84 billion
D) $47 billion
58) The above table shows some of the balance of payments accounts for Urland. What is
Urland’s balance on the capital and financial account?
A) -$146 billion
B) -$183 billion
C) -$99 billion
D) $142 billion
59) The above table shows some of the balance of payments accounts for Urland. What is
Urland’s balance in the official settlements account?
A) $405 billion
B) $62 billion
C) $99 billion
D) $37 billion
60) When a country has a negative current account, that country is
A) borrowing from the rest of the world.
B) lending to the rest of the world.
C) running a government budget surplus.
D) None of the above is correct.
61) Which of the following statements about the balance of payments accounts is CORRECT?
A) The current account must be greater than the capital and financial account.
B) The sum of all three accounts is always zero.
C) The official settlements account is typically larger than both the capital and financial account
and the current account.
D) Typically the capital and financial account is near zero because it equals the difference
between the current account and the official settlements account.
62) The European Commission believes that in 2016 exports of goods and services from Spain
will be 22 times larger than in 2013. Irish exports are expected to have grown by 15 percent over
the same period. If imports remain constant
A) the current account balance in both countries will become more positive.
B) the current account balance in both countries will become more negative.
C) there will be no change in the current account balance of both countries.
D) in both countries the capital and financial account balance will become more positive.
63) Over the last 25 years, according to the United States balance of payments
A) the current account and the capital and financial account balances tend to move in the same
direction.
B) the current account and the capital and financial account balances tend to move in opposite
directions.
C) there is no clear relationship between the current account balance and the capital and financial
account balance.
D) the official settlements balance fluctuates greatly from year to year.
64) During most of the 1980s, 1990s, and 2000s the U.S. has had a ________ current account
balance and a ________ capital and financial account balance.
A) positive; positive
B) positive; negative
C) negative; positive
D) negative; negative
65) If a country is currently lending more to the rest of the world than it is borrowing from the
rest of the world, the country is a
A) net borrower.
B) debtor nation.
C) net lender.
D) creditor nation.
66) Suppose Italy currently lends 1.5 billion euros to other nations and borrows 1 billion euros
from other nations. Italy is definitely a
A) net borrower.
B) net lender.
C) creditor nation.
D) debtor nation.
67) If a country lends more to foreign countries than it borrows from foreign countries in a year,
then definitely during that year
A) it has a current account deficit.
B) it is a creditor nation.
C) it is a debtor nation.
D) it is a net lender.
68) Which of the following countries are net lenders?
I. Japan
II. United States
A) I only
B) II only
C) both I and II
D) neither I nor II
69) If a country is currently borrowing more from the rest of the world than it is lending to the
rest of the world, the country is a
A) net borrower.
B) debtor nation.
C) net lender.
D) creditor nation.
70) Suppose this year Angola borrows $100 million from foreign countries, while it lends $15
million to other countries. Angola definitely is a
A) net borrower.
B) net lender.
C) creditor nation.
D) debtor nation.
71) If a country – during its entire history – has invested more in the rest of the world than the rest
of the world has invested in it, the country is a
A) net borrower.
B) debtor nation.
C) net lender.
D) creditor nation.
72) A creditor nation means a nation
A) whose exports exceed its imports.
B) whose current account is larger than its capital account.
C) whose current lending to the rest of the world exceeds its borrowing from the rest of the
world.
D) who through its history has invested more in the rest of the world than other countries have
invested in it.
73) Over its history, Spain has loaned more money abroad than foreigners have lent to it. Spain
is a
A) net lender.
B) net borrower.
C) creditor nation.
D) debtor nation.
74) If a nation during its entire history has borrowed more from the rest of the world than it has
lent to the rest of the world, the country is a
A) net borrower.
B) debtor nation.
C) net lender.
D) creditor nation.
75) A debtor nation means a nation
A) whose imports exceeds its exports.
B) whose current account is less than its capital account.
C) who—through its history—has invested less in the rest of the world than other countries have
invested in it.
D) whose current lending to the rest of the world exceeds its borrowing from the rest of the
world.
76) Over its history, Brazil has borrowed more from the rest of the world than it has loaned to the
rest of the world. Brazil
A) eventually will have a balance of payments account that does not balance.
B) is a debtor nation.
C) is a creditor nation.
D) has no current account balance.
77) A country that during its entire history has borrowed more from the rest of the world than it
has lent to it is a ________, and a country that during its entire history has invested more in the
rest of the world than other countries have invested in it is a ________.
A) debtor nation; investor nation
B) borrower nation; creditor nation
C) debtor nation; creditor nation
D) net borrower nation; net lender nation
78) A net borrower is a country that ________, while a net lender is a country that ________.
A) borrows more than it lends; owes more to foreigners than foreigners owe to it
B) decreases its stock of outstanding foreign debt; lends more than it borrows
C) borrows more than it lends; lends more than it borrows
D) lends more than it borrows; borrows more than it lends
79) This year a country loaned more to the rest of the world than it borrowed from the rest of the
world. In addition, the country has invested more in the rest of the world than other countries
have invested in it. The country is currently a ________ and also a ________.
A) net lender; creditor nation
B) net borrower; creditor nation
C) net borrower; debtor nation
D) debtor nation; net lender
80) A country that borrows more from the rest of the world than it lends to it in a year is called a
________, and a country that lends more to the rest of the world than it borrows from it in a year
is called a ________.
A) borrower; lender
B) importer; exporter
C) net borrower; net lender
D) gross borrower; gross lender
81) Today, the United States is a
I. net borrower.
II. net lender.
III. debtor nation.
IV. creditor nation.
A) I and IV
B) II and IV
C) I and III
D) II and III
82) If a country has a capital and financial account surplus, that country’s stock of international
indebtedness is
A) increasing.
B) decreasing.
C) constant.
D) zero.
83) If a country has a capital and financial account deficit, that country’s stock of international
indebtedness is
A) increasing.
B) decreasing.
C) constant.
D) zero.
84) Since the mid-1980s, the United States has been a net ________ and a ________ nation.
A) borrower; creditor
B) lender; creditor
C) borrower; debtor
D) lender; debtor
85) If we import more than we export from the rest of the world we
A) must borrow an equal amount from the rest of the world.
B) can lend an equal amount to the rest of the world.
C) are running a trade surplus.
D) are helping to finance investment in the rest of the world.
86) If U.S. net exports are positive
A) other countries borrow from the United States to pay for some of the goods they purchase
from the United States.
B) other countries make loans to the United States so that the United States can pay for some of
the goods it purchases from other countries.
C) the United States sells some of the assets it owns in other countries to pay for some of the
goods it sells to other countries.
D) the United States borrows from other countries to pay for some of the goods the United States
purchases from them.
87) The main item in the current account balance is
A) net interest income.
B) net transfers.
C) net exports.
D) net taxes.
88) The value of net exports increases when the value of ________.
A) exports of goods and services minus imports of goods and services decreases
B) imports of goods and services increase
C) imports of goods and services decrease
D) exports of goods and services decrease
89) The current account balance is defined as
A) the value of exports – the value of imports.
B) the amount of exported capital assets + net interest income.
C) the value of exports – the value of imports + net interest income + net transfers.
D) the difference between the import and export of official reserves.
90) The current account balance is equal to
A) net exports + net interest income + net transfers.
B) net exports – net interest income – net transfers.
C) net exports + net interest income – net transfers.
D) net interest income + net transfers – net exports.
91) Which of the following are included in the U.S. current account balance?
I. exports to Japan
II. interest payments made to Canada
III. transfer payments made to Israel
A) I only
B) I and II
C) I and III
D) I, II and III
92) All of the following are a current account transaction EXCEPT
A) importing services.
B) exporting goods.
C) investing abroad.
D) importing goods.
93) If net interest and net transfers are zero, and a country’s exports exceed its imports, the
country definitely has ________.
A) a current account surplus
B) a current account deficit
C) a capital and financial account surplus
D) an official settlements account surplus
94) If net interest and net transfers are $0, and a nation’s purchases of foreign goods and services
are $3.5 billion while its sales of goods and services to foreigners are $4.5 billion
A) it has a $1 billion surplus in its balance of payments.
B) it has a $1 billion deficit in its current account.
C) it has a $1 billion surplus in its current account.
D) its capital and financial account shows a surplus.
95) The country of Pimm exports $500 billion worth of goods and services and imports $400
billion worth of goods and services. Net interest income paid abroad is $50 billion and net
transfers are $0. The current account balance is ________.
A) $50 billion
B) $100 billion
C) $150 billion
D) $975 billion
96) A small country is an international borrower if its real interest rate without foreign borrowing
is ________ the world real interest rate.
A) higher than
B) equal to
C) lower than
D) not comparable to
97) A small country is an international borrower and its domestic supply of loanable funds
increases. Consequently, the equilibrium quantity of loanable funds used in the country
________ and the country’s international borrowing ________.
A) does not change; decreases
B) does not change; does not change
C) does not change; increases
D) increases; does not change
98) A small country is an international borrower and its domestic demand for loanable funds
increases. Consequently, the equilibrium quantity of loanable funds used in the country
________ and the country’s international borrowing ________.
A) does not change; increases
B) does not change; does not change
C) increases; increases
D) increases; does not change
99) A small country is an international lender and its domestic supply of loanable funds
increases. Consequently, the equilibrium quantity of loanable funds used in the country
________ and the country’s international lending ________.
A) increases; decreases
B) does not change; does not change
C) does not change; increases
D) increases; does not change
100) If the world real interest rate falls, then a country that is an international lender
A) increases the amount of its lending.
B) does not change the amount of its lending.
C) decreases the amount of its lending.
D) None of the above answers is correct because lending might increase, decrease, or not change.
101) The private sector surplus or deficit equals
A) saving minus investment.
B) net taxes minus government purchases.
C) investment minus saving.
D) government purchases minus net taxes.
102) Net exports equals
A) exports of goods and services minus imports of goods and services.
B) imports of goods and services minus exports of goods and services.
C) the government sector balance plus the private sector balance.
D) Both answers A and C are correct.
103) The government sector balance is equal to ________.
A) net taxes minus government purchases of goods and services
B) tariffs minus imports
C) saving minus investment
D) exports minus imports
104) The private sector balance is equal to ________.
A) income minus consumption minus net taxes
B) income minus consumption minus investment
C) saving minus investment
D) income minus consumption
105) A net exports deficit or surplus equals
A) taxes minus savings plus public and private investment.
B) the government sector balance plus the private sector balance.
C) net lending by both the private and public sector plus savings minus investment.
D) net worth plus the government sector balance minus the private sector balance.
106) Which of the following is CORRECT?
A) Net exports equals the government sector balance plus the private sector balance.
B) The government sector balance equals net exports plus the private sector balance.
C) The private sector balance equals net exports plus the government sector balance.
D) Net exports equals the current account plus the capital account plus the official settlements
account.
107) Which of the following statements is TRUE?
A) If private saving is greater than private investment, then the private sector has a surplus.
B) If private investment is greater than private saving, then the private sector has a deficit.
C) If private investment is greater than private saving, then either the government or net export
sector must have a surplus.
D) All of the above answers are correct.
108) X is exports, M is imports, T is net taxes, G is government expenditure, C is consumption
expenditure, S is saving, and I is investment. Which of the following equations represents the
private sector balance?
A) X – M
B) T – G
C) S – I
D) C + S + T
109) X is exports, M is imports, T is net taxes, G is government expenditure, C is consumption
expenditure, S is saving, and I is investment. The government sector balance is equal to
A) T – G.
B) C + S + T.
C) S – I.
D) X – M.
110) Suppose X – M = net exports; T – G = government sector balance; and S – I = private sector
balance. What relationship exists among these variables?
A) (X – M ) + (T – G ) + (S – I ) = 0
B) (X – M ) = (T – G ) + (S – I )
C) (T – G ) + (X – M ) = (S – I )
D) (T – G ) = (X – M ) + (S – I )
111) Which of the following statements is INCORRECT?
A) Net exports equals exports minus imports.
B) The government sector balance equals net taxes minus government expenditures on goods
and services.
C) The private sector balance equals private investment minus private saving.
D) The sum of government sector and private sector balances equals net exports.
112) A country has a government sector deficit and a private sector surplus. If the government
sector deficit increases, and the private sector surplus decreases, then ________.
A) net exports decrease or remain constant
B) net exports increase
C) net exports increase, decrease, or remain constant
D) net exports decrease
113) If net exports is a negative number, the government sector must ________ if the private
sector is in a ________.
A) run a surplus; surplus
B) equal zero; deficit
C) run a deficit; surplus
D) The statement errs because the accounts are not related.