3380- Balance of Payments

Unilateral transfers

"one-way payments" made by governments, private entities, or individuals that are sent abroad with nothing received in return ex: Foreign aid

Information about which of the following can potentially be learned from a country's balance of payments accounts?

- The country's openness to trade - The country's international competitiveness - The supply and demand for the country's currency

Because of double-entry bookkeeping, the sum of all of the items (or entries) in a country's balance of payments must equal ______.

0

Given national output (Y), consumption (C), investment (I), and government expenditures (G), the formula for the current account balance (BCA) is ______.

BCA = Y − (C + I + G)

The statistical record of a country's international transactions over a certain period of time presented in the form of double-entry bookkeeping is defined as the ______.

Balance of Payments

If a country is experiencing trade deficits year after year, the country's domestic industries may lack international ______

Competitiveness

In a(n) ______ floating exchange rate system, central banks discreetly buy and sell foreign exchanges with the result that the overall balance is indeterminate.

Dirty

The accounting principle behind the assignation of two bookkeeping entries to each transaction is referred to as _________ bookkeeping.

Double-entry

Under the pure _______ exchange rate regime, central banks will not intervene in the foreign exchange markets so the overall balance must balance.

Flexible

Factor income

Income (interest and dividend payments) received by investors on foreign investments in financial assets (securities)

In the early 21st century, which country was the world's largest creditor nation? (BCA) United States of America France Russia Japan

Japan

Originally applied to countries that accumulated precious metals, the theory that a continuing trade surplus should be a policy goal is known as______

Mercantilism

Capital accounts involve change of ownership AND acquisition AND disposal of

Nonproduced or nonfinancial assets

Merchandise trade

Tangible products being bought and sold ex: The export of computers

Which of the following accounts for the export and import of goods and services? a. The current account b. The capital account c. The financial account d. The official reserve account

The current account

Which of the following are classifications for a country's international transactions? The current account The trade deficit account The capital account The unofficial reserve account The financial account The official reserve account

The current account The capital account The financial account The official reserve account

Which of the following are categories in the current account? a. Unilateral transfers b. Factor income c. Foreign direct investment d. Services e. Merchandise trade

a. Unilateral transfers b. Factor income d. Services e. Merchandise trade

The statistical discrepancy entry in the balance of payments statement is necessary in part because some of the information used in compiling the statement is ______.

a. not time synchronized b. inaccurately or falsely reported c. based on different recording methods

Capital transfers involve change of ownership OR acquisition OR disposal of

an asset

The ______ includes transactions undertaken by the authorities to finance the overall balance and intervene in foreign exchange markets. a. statistical discrepancy b. official reserve account c. capital account d. current account

b. official reserve account

If a government would like to see its currency _______, then it would buy assets such as gold and foreign currency with domestic currency and generate a negative entry under official reserves.

depreciate or weaken

For the purpose of preserving the double-entry bookkeeping rule, unilateral transfers are regarded as an act of buying ______ from the recipients.

goodwill

Services

intangible products ex: Tourist expenditures

FDI (Foreign Direct Investment)

is a component of the capital account.

The current account balance is exports ______ imports ______ unilateral transfers. The current account balance is exports ______ imports ______ primary and secondary income

minus; plus

The capital account includes capital transfers and acquisitions and disposals of nonproduced and _____ assets between U.S. residents and foreigners. a. produced b. financial c. nonfinancial

nonfinancial

The balance of payments is defined as a flow concept because it is measured ______ time. a. over a period of b. independently of c. at a given

over a period of

Gold, foreign currency, special drawing rights (SDRs), and reserve positions in the International Monetary Fund (IMF) are official _____ assets.

reserve

The special category called _______ is used because the sum of the credits and debits actually recorded in the balance of payments differs from zero.

statistical discrepancy

A country's net foreign wealth is increased by a current account ______, which implies that the country used up ______ output than it produced. surplus; more surplus; less deficit; less deficit; more

surplus; less