Chapter 10

Refer to Table 10.1. The goods and services balance equals:

$5 billion

Refer to Table 10.1. The capital account balance equals:

-$25 billion

Refer to Table 10.1. The overall balance of payments equals:

-$30 billion

Refer to Table 10.1. The current account balance equals:

-$5 billion

Which of the following is an example of a capital inflow for the US?

An increase in US holdings of foreign assets

Which of the following is an example of a capital outflow into the US?

An increase of US assets held by foreign investors

_____________ are international transactions that take place for business or profit motives and independent of balance-of-payments considerations.

Autonomous transactions

When a U.S. firm exports goods to be paid in three months the U.S. debits:

Capital account

When a U.S. firm imports a good from England and pays for it by drawing on its pound sterling balances in a London Bank, the U.S. debits its current account and credits its:

Capital account

If a US resident purchases a foreign stock for $750 and pays for it by increasing foreign bank balances in the US, what entries would be made in the US balance of payments?

Capital account - debit of $900; Capital account - credit of $900

In 2002, the largest U.S. bilateral trade deficit was with:

China

____________ are balance of payments transactions involving the receipt of payments from foreigners.

Credit transactions

The balance of payments is the sum of which of the following?

Current account balance + capital account balance + statistical discrepancy

If the US government sells military hardware to the U.K., the transaction would be recorded on the US balance of payments as a:

Current account credit

Which of the following are included in the current account?

Currently produced goods and services Income on foreign investments Unilateral transfers

___________ are balance of payments transactions involving payments to foreigners.

Debit transactions

In the balance of payments, the statistical discrepancy is used to:

Ensure that the sum of all debits matches the sum of all credits

___________ is an example of a credit transaction in the balance of payments.

Exports of goods and services Unilateral transfers from foreigners Capital inflows

A nation's balance of payments is crucial in the development of:

Fiscal policy Monetary policy Trade policy

If a US firm exports $7,000 of goods which are to be paid for within six months, using double-entry bookkeeping, what entries should be made in the US balance of payments?

Goods export - credit of $7,000; Capital account - debit of $7,000

Which of the following statements is correct with regard to the United Stated becoming a net debtor nation

It allowed the US to grow faster It helped finance some of the US budget deficits It created the risk that foreigners may suddenly withdraw their investments in the US

In which of the following is a statistical discrepancy likely to occur?

Short term private capital flows

___________ indicates the international investment position of a country at a given point in time.

The balance of international indebtedness

Which of the following is consistent with a surplus in the balance of payments?

The excess of credits over debits in the current account The excess of credits over debits in the capital account

Which of the following is a definition of a deficit in the balance of payments?

The excess of debits over credits in the current and capital accounts

The sharp deterioration of the US trade balance on goods after the 1970's was due in large part to which of the following?

The sharp rise in the price of imported petroleum products during the 1970s The high international value of the dollar in the 1980s The more rapid growth of the United States than Europe and Japan during the 1990s

Which of the following does the international investment position consider?

The total amount of a nation's assets abroad at the end of the year The distribution of a nation's assets abroad at the end of the year The foreign assets in the nation at the end of the year

Which of the following must be considered when examining a nation's balance of payments?

Too much attention is placed on the balance of goods, and on focusing on short-term data

Accommodating items are:

Transactions in official reserve assets The items below the line Needed to balance international transactions

Which of the following is classified as a credit in the US balance of payments?

US exports

Which of the following is false?

a credit transaction is entered with a negative sign

Which of the following is false?

a net debit balance in the current and capital accounts measures the surplus in the nation's balance of payments

Capital inflows:

refer to an increase in foreign assets in the nation refer to a reduction in the nation's assets abroad lead to a payment from foreigners

The capital account of the U.S. includes:

the change in U.S. assets abroad and foreign assets in the U.S., other than official reserve assets