CHAPTER 19
THE BALANCE-OF-PAYMENTS ACCOUNTS
B. Multiple-Choice Questions
9. Which one of the following items would be a “debit” in a country’s balance-of-payments
account?
10. Suppose that a U.S. exporter sells goods to a foreign firm and receives payment
by the foreign firm drawing down its New York bank account and transferring the
funds to the U.S. exporter’s New York bank account. In this situation, the debit
entry in the U.S. balance of payments account is __________.
11. If a country has a current account deficit, which one of the following is true?
a. Y – (C + I + G) > 0
12. If a country has a current account deficit, this suggests that
13. Suppose that a country A individual investor receives a dividend payment from an
investment made abroad, and the payment is made by a deposit of funds into the
investor’s bank account in the country where the investment is made. The category for
the credit entry in this situation would be __________, and the category for the debit
entry would be __________.
14. Which one of the following “balances” in a balance-of-payments account has
incorporated all private asset changes before arriving at the measure of “balance?”
15. Suppose that, during 2015, country A had exports of goods of $50, imports of goods of
$60, exports of services plus primary income receipts from abroad of $36, and imports
of services plus primary income payments abroad of $30. In addition, during 2015,
country A made $15 of unilateral transfers abroad and received no unilateral transfers
from abroad. Given this information, country A’s “balance on current account” in 2015
was
d. a $6 surplus
16. Which one of the following items is a “credit” item in a country’s balance-of-payments
accounts?
17. If a country has a current account deficit, then the country must also have
18. Suppose that a U.S. importer buys goods from a foreign firm and makes payment
by drawing down its New York bank account and transferring the funds to the
foreign exporter’s bank account in the foreign country. In this situation, the credit
entry in the U.S. balance of payments account is __________.
19. The country/group of countries with which the United States has had the largest
merchandise trade deficits in the last several years is __________.
20. Suppose that country A’s citizens, firms, and governments own $750 billion of assets in
other countries and that foreign citizens, firms, and governments own $850 billion of
assets in country A. This situation indicates that country A has __________ of
__________.
d. a net international investment position; plus $100 billion
21. If, in a country’s balance of payments statement, the merchandise trade balance is $-100,
services exports and factor income receipts from abroad in total exceed services imports
and factor income payments abroad by $25, unilateral transfers made exceed unilateral
transfers received by $15, and the financial account has debits exceeding credits by $30,
then the country’s balance on current account is
22. If a U.K. citizen removes funds from a London bank and places them in his/her bank
account in the United States, this deposit into the United States is recorded as a
__________ item in the U.S. balance-of-payments accounts. If, in a different transaction,
a U.K. firm sells a good to a U.S. citizen, this U.K. export (U.S. import) of the good is
__________ item in the U.S. balance-of-payments accounts.
23. Which one of the following items would be classified as a “debit” in country A’s
balance-of-payments accounts?
24. If a U.S. citizen gives $1,000 to a French citizen by writing a check on a New York bank
for deposit to the French citizen’s New York bank account, the credit item in the U.S.
balance-of-payments accounts is __________ and the debit item is __________.
25. In balance-of-payments accounting, the acquisition of a foreign production facility by a
U.S. firm is a __________ item in the U.S. balance of payments; the deposit of funds in a
foreign bank account by a U.S. citizen __________ item in the U.S. balance of payments.
26. In its international investment position in the 1980s, the United States moved from a
position of a __________ at the beginning of the decade to that of a __________ at the
end of the decade. In the last several years, the U.S. net international investment
position
has been __________.
27. Suppose that a developing country receives foreign aid in the form of a shipment of
wheat. Balance-of-payments accountants in that country would record the “debit” item in
their accounts as __________ and the credit item as __________.
28. Other things equal, an export of goods from the United States as a gift to foreigners
would lead to an improvement in the U.S. __________ and to no change in the
__________.
d. merchandise trade balance; balance on goods and services
29. If we compile data on a country’s exports and imports of goods and services and its
primary income and secondary income flows, the resulting net credit or net debit account
would be called that country’s
a. balance of trade.