Econ 335 final exam ch.10
Which of the following is considered a capital inflow? a. A sale of U.S. financial assets to a foreign buyer b. A loan from a U.S. bank to a foreign borrower c. A purchase of foreign financial assets by a U.S. buyer d. A U.S. citizen's repayment of a loan from a foreign bank
a. A sale of U.S. financial assets to a foreign buyer
A country that is a net international debtor initially experiences: a. An augmented savings pool available to finance domestic spending b. A higher interest rate, which leads to lower domestic investment c. A loss of funds to trading partners overseas d. A decrease in its services exports to other countries
a. An augmented savings pool available to finance domestic spending
On the balance-of-payments statements, merchandise imports are classified in the: a. Current account b. Capital account c. Unilateral transfer account d. Official settlements account
a. Current account
The value to American residents of income earned from overseas investments shows up in which account in the U.S. balance of payments? a. Current account b. Trade account c. Unilateral transfers account d. Capital account
a. Current account
In a country's balance of payments, which of the following transactions are debits? a. Domestic bank balances owned by foreigners are decreased b. Foreign bank balances owned by domestic residents are decreased c. Assets owned by domestic residents are sold to nonresidents d. Securities are sold by domestic residents to nonresidents
a. Domestic bank balances owned by foreigners are decreased
In the balance of payments, the statistical discrepancy is used to: a. Ensure that the sum of all debits matches the sum of all credits b. Ensure that trade imports equal the value of trade exports c. Obtain an accurate account of a balance-of-payments deficit d. Obtain an accurate account of a balance-of-payments surplus
a. Ensure that the sum of all debits matches the sum of all credits
Reducing a current account deficit requires a country to: a. Increase private saving relative to investment b. Increase private consumption relative to saving c. Increase private investment relative to consumption d. Increase private investment relative to saving
a. Increase private saving relative to investment
Reducing a current account surplus requires a country to: a. Increase the government's deficit and increase private investment relative to saving b. Increase the government's deficit and decrease private investment relative to saving c. Decrease the government's deficit and increase private investment relative to saving d. Decrease the government's deficit and decrease private investment relative to saving
a. Increase the government's deficit and increase private investment relative to saving
Unlike the balance of payments, the balance of international indebtedness indicates the international: a. Investment position of a country at a given moment in time b. Investment position of a country over a one-year period c. Trade position of a country at a given moment in time d. Trade position of a country over a one-year period
a. Investment position of a country at a given moment in time
Credit (+) items in the balance of payments correspond to anything that: a. Involves receipts from foreigners b. Involves payments to foreigners c. Decreases the domestic money supply d. Increases the demand for foreign exchange
a. Involves receipts from foreigners
Concerning a country's business cycle, rapid growth of production and employment is commonly associated with: a. Large or growing trade deficits and current account deficits b. Large or growing trade deficits and current account surpluses c. Small or shrinking trade deficits and current account deficits d. Small or shrinking trade deficits and current account surpluses
a. Large or growing trade deficits and current account deficits
According to researchers at the Federal Reserve, the loss of jobs associated with a deficit in the current account tends to be: a. Offset by the increase of jobs associated with a surplus in the capital account b. Reinforced by the decrease of jobs associated with a surplus in the capital account c. A threat to the level of employment for the economy as a whole d. Of no long-run economic consequence for workers who lose their jobs
a. Offset by the increase of jobs associated with a surplus in the capital account
Concerning a country's business cycle, ____ is commonly associated with large or growing current account deficits: a. Rapid growth rates of production and employment b. Slow growth rates of production and employment c. Falling interest rates on government securities d. Falling interest rates on corporate securities
a. Rapid growth rates of production and employment
Which of the following is classified as a credit in the U.S. balance of payments? a. U.S. exports b. U.S. gifts to other countries c. A flow of gold out of the U.S. d. Foreign loans made by U.S. companies
a. U.S. exports
In recent years, the two largest holders of U.S. government securities have been a. China and Japan b. Mexico and Canada c. Brazil and Spain d. Germany and France
a. China and Japan
If an American purchases a ticket from Scandinavian Airlines, paying by a personal check, which entries result in the balance-of-payments accounts of Norway or the United States? a. a credit in Norway's service account b. a debit in Norway's service account c. a credit in the U.S. unilateral transfers account d. a debit in the U.S. unilateral transfers account ANSWER: a
a. a credit in Norway's service account
Concerning the U.S. balance of payments statement, the sum of debits and credits on all transactions will always a. be equal b. show a deficit c. show a surplus d. be unequal
a. be equal
The value of direct investment by Ford Motor Co. in Canada is included in the U.S. a. capital and financial account b. current account c. net export account d. merchandise trade account
a. capital and financial account
If General Electric Inc. pays dividends to its Canadian stockholders, this represents a a. debit in the U.S. current account b. credit in the U.S. current account c. debit in the U.S. capital and financial account d. credit in the U.S. capital and financial account
a. debit in the U.S. current account
A negative balance in the capital and financial account suggests that a country a. is realizing a surplus on its current account b. is realizing a deficit on its current account c. borrowing from the rest of the world d. imports more goods and services than it exports
a. is realizing a surplus on its current account
When the United States imports goods and services from other countries, the United States a. makes payments to other countries b. receives payments from other countries c. becomes a net lender to other countries d. receives interest income from other countries
a. makes payments to other countries
If Germany has invested over its history more in other countries than other countries have invested in Germany, then Germany is a a. net creditor nation b. net debtor nation c. net importer of goods and services d. net exporter of stocks and bonds
a. net creditor nation
For the U.S. balance of payments statement, which of the following is not recorded in the capital and financial account? a. net interest income from international investments b. purchases of Chinese stocks and bonds c. sales of Mexican stocks and bonds d. the acquiring of a business firm in another country
a. net interest income from international investments
For the United States, the largest component of its current account transactions consists of a. payments for imports of goods and services and receipts from exports of goods and services b. payments for military transactions with other countries c. travel and transportations payments and receipts with other countries d. unilateral transfers to other countries and from other countries
a. payments for imports of goods and services and receipts from exports of goods and services
In recent years, ______ has been the world's largest international debtor a. the United States b. China c. Japan d. the United Kingdom
a. the United States
Concerning the U.S. balance of payments statement, throughout the past 30 years a. the current account balance and the capital account balance have moved in the opposite direction b. the current account balance and the capital account balance have moved in the same direction c. the official reserve assets of the U.S. government have shrunk to zero d. the official reserve assets of the U.S. government have increased in infinite amounts
a. the current account balance and the capital account balance have moved in the opposite direction
If the United States government sells military hardware to Saudi Arabia, the transaction would be recorded on the U.S. balance of payments as a: a. Current account debit b. Current account credit c. Capital account debit d. Capital account credit
b. Current account credit
Concerning the U.S. balance of payments, which account is defined in essentially the same way as the net export of goods and services, which comprises part of the country's gross domestic product? a. Merchandise trade account b. Goods and services account c. Current account d. Capital account
b. Goods and services account
The balance of international indebtedness is a record of a country's international: a. Investment position over a period of time b. Investment position at a fixed point in time c. Trade position over a period of time d. Trade position at a fixed point in time
b. Investment position at a fixed point in time
Debt (-) items in the balance of payments correspond to anything that: a. Involves receipts from foreigners b. Involves payments to foreigners c. Increases the domestic money supply d. Decreases the demand for foreign exchange
b. Involves payments to foreigners
When a country realizes a deficit on its current account: a. Its net foreign investment position becomes positive b. It becomes a net demander of funds from other countries c. It realizes an excess of imports over exports on goods and services d. It becomes a net supplier of funds to other countries
b. It becomes a net demander of funds from other countries
All of the following are debit items in the balance of payments, except: a. Capital outflows b. Merchandise exports c. Private gifts to foreigners d. Foreign aid granted to other nations
b. Merchandise exports
The U.S. has a balance of trade deficit when its: a. Merchandise exports exceed its merchandise imports b. Merchandise imports exceed its merchandise exports c. Goods and services exports exceed its goods and services imports d. Goods and services imports exceed its goods and services exports
b. Merchandise imports exceed its merchandise exports
The ______ is currently the main reserve currency of the global trading and financial system a. Euro b. U.S. dollar c. British pound d. Chinese yuan
b. U.S. dollar
If a resident of Japan purchases a ticket from American Airlines, paying by a personal check, which entries result in the balance-of-payments accounts of Japan or the United States? a. a debit in the U.S. service account b. a credit in the U.S. service account c. a credit in Japan's unilateral transfers account d. a debit in Japan's unilateral transfers account
b. a credit in the U.S. service account
Concerning the balance of payments statement, the ______ indicates the receipts from exports of goods and services sold overseas, the payments for imports of goods and services from overseas, unilateral transfers (net), and income receipts and payments (net) a. capital and financial account b. current account c. official reserve asset account d. monetary gold account
b. current account
If the United States is a net borrower-from or lender-to the rest of the world, this is best indicated by the U.S. a. balance of payments position b. current account balance c. merchandise trade balance d. net export balance
b. current account balance
A debit in the U.S. current account would be represented by a. earnings on U.S. investments abroad flowing into the United States b. gifts that Americans make to the poor in Africa c. Chinese investors purchasing the securities of the U.S. government d. exports of Boeing jetliners to South Korea
b. gifts that Americans make to the poor in Africa
If the United States has a negative balance on its current account, it a. is a net lender to the rest of the world b. is a net borrower from the rest of the world c. realizes a negative balance on its capital and financial account d. runs a surplus in the budget of the federal government
b. is a net borrower from the rest of the world
A positive balance in the capital and financial account suggests that a country a. is realizing a surplus on its current account b. is realizing a deficit on its current account c. lending to the rest of the world d. exports more goods and services than it imports
b. is realizing a deficit on its current account
If Japan lends more to the rest of the world than it borrows from the rest of the world, Japan is a a. net borrowing country b. net lending country c. net exporting country of goods and services d. net importing country of goods and services
b. net lending country
If the U.S current account balance is negative a. the United States lends to other countries who purchase goods and services from the United States b. the United States borrows from other countries to pay for the goods and services that the United States buys from them c. the U.S. balance of international indebtedness shows that the United States is a net creditor nation d. the U.S. balance of international indebtedness shows that the United States is a net exporting nation
b. the United States borrows from other countries to pay for the goods and services that the United States buys from them
U.S. military aid granted to foreign countries is entered in the: a. Merchandise trade account b. Capital account c. Current account d. Official settlements account
c. Current account
For the first time since World War I, in 1985 the United States became a net international: a. Exporter b. Importer c. Debtor d. Creditor
c. Debtor
Which balance-of-payments item does not directly enter into the calculation of the U.S. gross domestic product? a. Merchandise imports b. Shipping and transportation receipts c. Direct foreign investment d. Service exports
c. Direct foreign investment
If the U.S. faces a balance-of-payments deficit on the current account, it must run a surplus on: a. The official settlements account b. The capital account c. Either the official settlements account or the capital account d. Both the official settlements account and the capital account
c. Either the official settlements account or the capital account
The current account of the U.S. balance of payments does not include: a. Investment income b. Merchandise exports and imports c. The sale of securities to foreigners d. Unilateral transfers
c. The sale of securities to foreigners
The current account of the United States would move toward a surplus as a result of a. U.S. households importing beer from German breweries b. Chinese investors purchasing securities of the U.S. government c. German tourists visiting Yellowstone National Park d. U.S. construction firms contracting with Japanese architects to design their buildings
c. German tourists visiting Yellowstone National Park
Credit items on the U.S. balance of payments statement result in a. a deficit on the current account of the United States b. a deficit on the capital and financial account of the United States c. an inflow of foreign exchange for the United States d. an outflow of foreign exchange for the United States
c. an inflow of foreign exchange for the United States
Mary Smith, a resident of Denver Colorado, purchases a Swiss watch in Chicago. On the U.S. balance of payments statement, this transaction appears on the a. official reserve asset account b. net borrowing and lending account c. current account d. services account
c. current account
If U.S. investors purchase Treasury Bills of the British government, this results in a a. debit transaction in the U.S. current account b. credit transaction in the U.S. current account c. debit transaction in the U.S. capital and financial account d. credit transaction in the U.S. capital and financial account
c. debit transaction in the U.S. capital and financial account
A deficit in the U.S. current account is offset by a surplus a. in the U.S. trade account b. in the U.S. balance of payments c. in the U.S. capital and financial account d. in the U.S. official reserve assets
c. in the U.S. capital and financial account
Over its history, suppose that France has borrowed more from the rest of the world than it has lent to the rest of the world. This means that France a. has realized continuous surpluses in its current account b. has realized continuous surpluses in its goods and services account c. is a net debtor nation d. is a net creditor nation
c. is a net debtor nation
To "balance" the U.S. balance of payments, U.S. Commerce Department statisticians employ a. accounting transactions b. inflows or outflows of gold reserves c. statistical discrepancy d. inflows or outflows of government securities
c. statistical discrepancy
The burden of a current account deficit would be the least if a nation uses what it borrows to finance: a. Unemployment compensation benefits b. Social Security benefits c. Expenditures on food and recreation d. Investment on plant and equipment
d. Investment on plant and equipment
The U.S. balance of trade is determined by: a. Exchange rates b. Growth of economies overseas c. Relative prices in world markets d. All of the above
d. All of the above
Which of the following would call for inpayments to the United States? a. American imports of German steel b. Gold flowing out of the United States c. American unilateral transfers to less-developed countries d. American firms selling insurance to British shipping companies
d. American firms selling insurance to British shipping companies
The role of ____ is to direct one nation's savings into another nation's investments: a. Merchandise trade flows b. Services flows c. Current account flows d. Capital flows
d. Capital flows
If an American receives dividends from the shares of stock she or he owns in Toyota, Inc., a Japanese firm, the transaction would be recorded on the U.S. balance of payments as a: a. Capital account debit b. Capital account credit c. Current account debit d. Current account credit
d. Current account credit
Reducing a current account deficit requires a country to: a. Increase the government's deficit and increase private investment relative to saving b. Increase the government's deficit and decrease private investment relative to saving c. Decrease the government's deficit increase private investment relative to saving d. Decrease the government's deficit and decrease private investment relative to saving
d. Decrease the government's deficit and decrease private investment relative to saving
All of the following are credit items in the balance of payments, except: a. Investment inflows b. Merchandise exports c. Payments for American services to foreigners d. Private gifts to foreign residents
d. Private gifts to foreign residents
Which of the following indicates the international investment position of a country at a given moment in time? a. The balance of payments b. The capital account of the balance of payments c. The current account of the balance of payments d. The balance of international indebtedness
d. The balance of international indebtedness
When all of the debit or credit items in the balance of payments are combined: a. Merchandise imports equal merchandise exports b. Capital imports equal capital exports c. Services exports equal services imports d. The total surplus or deficit equals zero
d. The total surplus or deficit equals zero
The _____ tabulates the U.S. Balance of Payments a. U.S. International Trade Commission b. U.S. Department of Labor c. Council of Advisors to the Presidents d. U.S. Department of Commerce
d. U.S. Department of Commerce
About two-thirds of the world's official foreign exchange reserves are held in a. Swiss francs b. British pounds c. Japanese yen d. U.S. dollars
d. U.S. dollars
Throughout the past 30 years, the U.S. balance-of-payments statement has indicated a. a positive balance on the current account; a positive balance on the capital and financial account b. a negative balance on the current account; a negative balance on the capital and financial account c. a positive balance on the current account; a negative balance on the capital and financial account d. a negative balance on the current account; a positive balance on the capital and financial account
d. a negative balance on the current account; a positive balance on the capital and financial account
In recent years, the United States has been an example of a. a net exporter of goods b. a net importer of services c. a net lending country d. a net borrowing country
d. a net borrowing country
Adopting the Special Drawing Right (SDR) as a reserve currency might possibly occur if the United States was to operate continuous bad economic policy in the form of a. deficit spending b. high inflation c. currency depreciation d. all of the above
d. all of the above
As the world's main reserve currency, the U.S. dollar is used throughout the world as a a. medium of exchange b. unit of account c. store of value d. all of the above
d. all of the above
For the United States, a loss in its reserve currency position would likely result in several costs, including all of the above a. Americans would have to pay more for imported goods as the dollar depreciates b. interest rates on both private and governmental debt would increase c. the economic supremacy of the United States would be lessened d. all of the above
d. all of the above
The United States realizes several benefits from the dollar serving as the main reserve currency of the world, including a. Americans can buy goods at a marginally cheaper price than households in other nations who must exchange their currency with each purchase and pay a transaction cost b. Americans can borrow at lower interest rates for homes and automobiles c. the U.S. government can finance larger deficits longer and at lower interest rates d. all of the above
d. all of the above
A credit transaction would appear on the balance of payments as a result of a. the import of goods and services b. domestic residents touring overseas c. transfer payments made to foreign relatives d. an inflow of investment capital
d. an inflow of investment capital
A Canadian lumber company purchases a saw mill in the state of Washington. On the U.S. balance of payments statement, this transaction appears in the a. current account b. net exports account c. net imports account d. capital and financial account
d. capital and financial account
If Japanese investors purchase Treasury Bills of the U.S. government, this results in a a. debit transaction in the U.S. current account b. credit transaction in the U.S. current account c. debit transaction in the U.S. capital and financial account d. credit transaction in the U.S. capital and financial account
d. credit transaction in the U.S. capital and financial account
The current account of the United States includes all of the following except a. trade in goods and services b. unilateral transfers c. income receipts and payments d. gold flows between the United States and foreign central banks
d. gold flows between the United States and foreign central banks
A debit transaction would appear on the balance of payments as a result of a. the export of goods abroad b. the export of services abroad c. transfer payments received by domestic residents d. outflows of investment capital
d. outflows of investment capital
The balance of payments statement records a. only changes in a country's official reserve assets that occur over a period of time b. only changes in a country's trade flows that occur over a period of time c. only the flow of labor and capital among countries over a period of time d. the international trading, lending, and borrowing transactions among countries over a period of time
d. the international trading, lending, and borrowing transactions among countries over a period of time
