5.1

If a French company sells 1000 gallons of Perrier to a U.S. company at 5 euros per gallon, and uses the money to buy stock in a Spanish cork company, how does this affect the French balance of payments accounts?

Debit: capital and financial account; credit: merchandise trade

If a U.S. company imports 10 Toyotas from Japan at $15,000 each, and the Japanese company buys airline tickets on a U.S. airline with the money, how does this affect the U.S. balance of payments accounts? (DEBIT/CREDIT)

Debit: merchandise trade; credit: services

If the United States donates footballs to Japan, how is the transaction recorded on the U.S. balance of payments accounts? (DEBIT/CREDIT)

Debit: net unilateral transfers; credit: merchandise trade

Which of the following would be part of the nation's capital and financial account?

One hundred shares of British Petroleum stock purchased by an American

Which of the following would be part of the nation's current account?

The interest an American earns on a British bond

A friend claims that the United States is a net international debtor. The best way of testing this claim is to see whether

U.S. receipts from foreign assets exceeded U.S. payments to foreign owners of U.S. assets

A capital and financial account surplus necessarily implies

a current account deficit.

If a country has a current account surplus, it also has

an increase in its holding of net foreign assets.

An economic benefit of capital outflows is that they

create future income payment inflows.

Suppose a wealthy Canadian donates $10 million to charities in Mexico. Mexican net exports ________ and the current account balance ________.

fall; is unchanged

If a U.S. firm buys tulips from a Dutch firm and the Dutch firm uses the dollars it gets to buy U.S. stocks, the U.S. trade balance ________ and the U.S. capital and financial account ________.

falls; rises

If France has a trade deficit, then

imports into France exceed exports from France.

An increase in a small open economy's government budget deficit that reduces national saving and the current account balance causes an

increase in absorption.

Assuming no change in the effective tax rate on capital, a decrease in the government budget deficit will reduce the current account deficit if and only if the decrease in the budget deficit

increases desired national saving.

If a French company exports $2 million of machinery to Italy and French tourists spend $2 million at Italian beaches, the Italian current account balance ________, and the Italian capital and financial account balance ________.

is unchanged; is unchanged

The United States became a net debtor because

it ran consistently large current account deficits.

A country's capital and financial account balance decreases if

its current account balance increases.

If there are no net factor payments from abroad and no unilateral transfers, net exports of $10 billion is the same as

net acquisition of foreign assets of $10 billion.

The current account balance consists of

net exports of goods and services, plus investment income from abroad, plus net unilateral transfers.

If all international factor payment flows are investment income, then net investment income from abroad equals

net factor payments from abroad.

Assume that an increase in Costa Rica's government budget deficit reduced desired national saving by 10 million colon. Assuming Costa rice is a small open economy, you would expect the government's action to

reduce the current account balance by exactly 10 million colon.

In a large open economy like the United States, an increased government budget deficit which reduces national saving

reduces investment and reduces the current account balance.

If a Japanese company sells 200 VCRs to a French company and uses the money to buy U.S. government bonds, the Japanese merchandise trade balance ________, and the Japanese capital and financial account balance ________.

rises; falls

If the United States sells computers to Russia, and uses the proceeds to buy shares of stock in Russian companies, the U.S. trade balance ________ and the U.S. capital and financial account balance ________.

rises; falls

If a French company exports $2 million of machinery to Italy and French tourists spend $2 million at Italian beaches, the French merchandise trade balance ________, and the French capital and financial account balance ________.

rises; is unchanged

A negative value for the U.S. official reserve assets line in the balance of payments accounts means that

the U.S. central bank has increased its holdings of foreign reserve assets.

Net exports of goods are known as

the merchandise trade balance.

The official settlements balance equals

the net increase in a country's official reserve assets.

A country has a current account surplus if

the value of its exports exceeds the value of its imports, assuming net income from foreign assets and net unilateral transfers have a value of zero.

If a country's merchandise exports exceed its merchandise imports it has a

trade surplus.