ECON270: Chapter 9 questions (Exam 3)
Russia imports 5 billion Rubles of goods and exports 7 billion rubles of goods. At the same time, Russia imports 4 billion rubles of services, and Russia makes a 2 billion Ruble net unilateral transfer to Albania. Russia's current account equals
-4 billion Rubles
If the U.K. exports 14 billion British Pounds of products, and imports 10 billion British pounds of products, its trade balance equals
4 billion British Pounds
GNP (Gross National Product) equals GDP plus A. net receipts of factor income from the rest of the world and net unilateral transfers. B. a statistical discrepancy. C. indirect business taxes. D. the capital consumption allowance.
A. net receipts of factor income from the rest of the world and net unilateral transfers.
Why is a current account surplus equivalent to foreign investment? A. A current account surplus leads to the net accumulation of foreign assets. B. A current account surplus leads to additional borrowing of foreign funds. C. A current account surplus indicates that an economy must be importing more than it exports. D. None of the above.
B. A current account surplus leads to additional borrowing of foreign funds.
Which of the following is NOT an account in the balance of payments? A. Current account B. Future account C. Capital account D. Financial account
B. Future account
When a government (typically corrupt) incurs debt without the consent of the people and the debt is not used for the people's benefit, the debt is A. corrupt. B. odious. C. non-consensual. D. None of the above.
B. odious
Which of the following is not part of the definition for Gross National Product? A. The market value... B. ...of all final goods and services... C. ...produced within a country's borders... D. ...within a given period of time.
C. ...produced within a country's borders...
Which of the following represents direct foreign investment? A. Intel moves part of its production to a plant in Malaysia. B. An American hedge fund buys Russian government bonds. C. A deposit that an American tourist makes at a Swiss bank to open an account. D. A purchase by an Italian company of Microsoft stock on the New York Stock Exchange.
C. A deposit that an American tourist makes at a Swiss bank to open an account.
Which of the following is not a positive of having a large trade deficit? A. A large trade deficit allows for a higher level of investment than possible solely from domestic savings. B. A large trade deficit can signal that foreigners have confidence in the current set of economic policies. C. A large trade deficit accumulates foreign debt that must be serviced in the future. D. A large trade deficit can signal the positive expectations of the future prospects of the economy. E. All of the above are positives. F. None of the above are positives.
C. A large trade deficit accumulates foreign debt that must be serviced in the future.
Which of the following is NOT an example of debt finance in developing countries? A. A group of commercial banks provides a loan to the Brazilian government. B. Citibank provides a loan to a Brazilian firm. C. Citibank purchases shares of a Brazilian firm on the stock market. D. The IMF provides a loan to the Brazilian government.
C. Citibank purchases shares of a Brazilian firm on the stock market.
Debt that is money owed to non-residents and must be paid in foreign currency is known as A. undesirable debt. B. unsustainable debt. C. external debt. D. foreign debt.
C. external debt.
We have the following data for a hypothetical open economy: GNP = $9,000 Consumption (C) = $7,800 Investment (I) = $800 Government Purchases (G) = $1,200 What is the value of the current account balance?
CA = -800
Debit or Credit in which balance of payments: Exports of goods and services
Credit in Current Account
Debit or Credit in which balance of payments: Primary and secondary income receipts
Credit in Current Account
Debit or Credit in which balance of payments: An incurrence of liabilities to foreigners
Credit in Financial Account
Which of the following is not a difference between portfolio capital flows and investment capital flows? A. Portfolio investment can move in or out of a nation extremely quickly. B. Portfolio investment tends to use funds with a shorter time horizon. C. Investment flows tend to be more illiquid. D. Portfolio capital flows are a net increase in the amount of resources available for investment.
D. Portfolio capital flows are a net increase in the amount of resources available for investment.
External debt A. is undesirablelong dashonly financially weak countries have it. B. is avoidablelong dashonly financially careless countries have it. C. is unusuallong dashcountries only take it on when they must. D. is ubiquitous, or omnipresent-all countries have it.
D. is ubiquitous, or omnipresent-all countries have it.
A current account deficit: A. in general is harmful to countries, since the country is buying more goods & services from the world than it is selling to the rest of the world. B. is harmful to countries, since it is financed by financial account outlflows, draining the country's financial assets. C. may be beneficial to countries, because owing more to other countries makes them dependent. D. may be beneficial to countries, since the country might benefit from technology transfer.
D. may be beneficial to countries, since the country might benefit from technology transfer.
Your country has a positive International Investment Position (IIP) with another country. This statement means A. the other country's citizens own more assets in your country than your country's citizens own in the other country. B. you are in more debt to the other country than it is to your country. C. the other country is in more debt to you than your country is to them. D. your country's citizens own more assets in the other country than the other country's citizens own in your country.
D. your country's citizens own more assets in the other country than the other country's citizens own in your country.
Debit or Credit in which balance of payments: An acquisition of foreign financial assets
Debit in Financial Account
Debit or Credit in which balance of payments: An increase in official Reserve Assets
Debit in Financial Account
In the current Post-Industrial economy, international trade in services (including banking and financial services):
I relatively small
Consider the following hypothetical data for an open economy (in millions): Assets owned inside the U.S. by U.S. citizens = $140,000 Assets owned outside the U.S. by U.S. citizens = $22,786 Assets owned outside the U.S. by foreign citizens = $110,000 Assets owned inside the U.S. by foreign citizens = $20,315 The value of the International Investment Position (IIP) of the U.S. is ?
IIP =
Consider the following hypothetical data for an open economy (in millions): Assets owned inside the U.S. by U.S. citizens = $150,000 Assets owned outside the U.S. by U.S. citizens = $19,888 Assets owned outside the U.S. by foreign citizens = $108,000 Assets owned inside the U.S. by foreign citizens = $22,786 The value of the International Investment Position (IIP) of the U.S. is ?
IPP = -2,898
The U.S. government sells gold for dollars. The transaction is recorded as a ? in the ? account.
The transaction is recorded as a CREDIT in the FINANCIAL account.
A Japanese firm in Tennessee buys car parts from a subsidiary in Malaysia. The transaction is recorded as a ? in the ? account.
The transaction is recorded as a DEBIT in the CURRENT account.
A migrant worker in California sends $500 home to his village in Mexico. The transaction is recorded as a ? in the ? account.
The transaction is recorded as a DEBIT in the CURRENT account.
An American church donates five tons of rice to the Sudan to help with famine relief. The transaction is recorded as a ? in the ? account.
The transaction is recorded as a DEBIT in the CURRENT account.
An American retired couple flies from Seattle to Tokyo on Japan Airlines. The transaction is recorded as a ? in the ? account.
The transaction is recorded as a DEBIT in the CURRENT account.
An American mutual fund manager uses the deposits of his fund investors to buy Brazilian telecommunication stocks. The transaction is recorded as a ? in the ? account.
The transaction is recorded as a DEBIT in the FINANCIAL account.
The Mexican government sells pesos to the United States Treasury and buys dollars. The transaction is recorded as a ? in the ? account.
The transaction is recorded as a DEBIT in the FINANCIAL account.
Use the following information to answer the questions below. Assume that the capital account is equal to zero. Exports of goods and services: 580 Primary income received: 20 Secondary income received: 520 Imports of goods and services: 270 Primary income paid abroad: 180 Secondary income paid: 40 Net acquisition of financial assets: 600 Net incurrence of liabilities: 120 Net change in financial derivatives: -150 Trade balance? CA balance? FA balance? Statistical discrepancy?
Trade balance: 310 CA balance: 630 FA balance: 330 Statistical discrepancy: -300
