Chapter 10 - Macroeconomics Quiz

An economy with a larger involvement in foreign trade:

may measure its exports as a share of GDP

A series of macroeconomic events has led an economy into a deep recession. Which of the following factors is most likely to have initiated this series of events?

unbalanced trade

The final category of the current account balance is ____________________, which can be thought of as payments made by individuals in which money is sent abroad _________________________.

unilateral transfers; without any direct good or service being received

A country's current national savings and investment identity is expressed in algebraic terms as X - M = S + (G - T) - I. In this instance:

private and public domestic savings are higher than domestic investment.

In 2010, a country imported goods worth $500 billion and exported goods worth $443billion. It exported services worth $248 billion and imported services worth $330 billion. Payments on investments abroad totaled $199 billion, while returns paid on foreign investments were $125 billion. Unilateral transfers from the country to other nations amounted to $94 billion. What was the country's current account deficit for 2010?

$159 billion

A country finds itself in the following situation: a government budget surplus of$900; total domestic savings of $200, and total domestic physical capital investment of$1300. According to the national saving and investment identity, if investment decreases by $300 while the government budget surplus and savings remain the same, what will happen to the current account balance?

$200 deficit changes to $100 surplus

In 2010, the country of Vesey exported goods worth $312 billion and services worth$198 billion. It imported goods worth $525 billion and services worth $255 billion. It sent$1.2 billion in famine relief to Africa, and received $3 billion to support its first democratic election efforts. What was the merchandise trade deficit in Vesey in 2010?

$213 billion

In 2010, the country of Vesey exported goods worth $312 billion and services worth$198 billion. It imported goods worth $525 billion and services worth $255 billion. It sent$3 billion in famine relief to Africa, and received $1.2 billion to support its first democratic election efforts. What was the current account deficit in Vesey for 2010?

$271.8 billion

In 2010, a small country imported goods worth $500 billion and exported goods worth $443 billion. It exported services worth $248 billion and imported services worth $330 billion. Payments on investments abroad totaled $199 billion, while returns paid on foreign investments were $125 billion. Unilateral transfers from the country to other nations amounted to $94 billion. What was the country's merchandise trade deficit for 2010?

$57 billion

During the past year a country's government ran a budget surplus. How will this be represented as a component of in the country's national savings and investment identity?

(T - G); saving side

If a country's economy records a surplus, how will the X and M components be represented in its national savings and investment identity?

(X - M); left side

A country's current national savings and investment identity is expressed in algebraic terms as X - M = S + (T - G) - I. In this instance:

private and public domestic savings are higher than domestic investment

Which of the following involves a financial outflow from the U.S. economy?

U.S. firms buying logging rights to China's forests

Which of the following represents a financial inflow into the U.S. economy?

Canadian investors buying real estate in Arizona

Which of the following represents a financial outflow from the U.S. economy?

U.S. investors buying foreign assets in Germany

One of the questions on Anders' economics exam provided him with the algebraic term: I + (G - T) = S + (M - X) and asked him to choose its matching written identity. Of the following possible answers presented on the exam, which one is the correct choice? a. Demand for financial capital = Supply of financial capital b. Investment + government savings = Supply + trade surplus c. Trade surplus + government savings = Supply + trade deficit d. Domestic investment + public savings = Domestic savings + trade deficit

Demand for financial capital = Supply of financial capital

Which of the following represents the national savings and investment identity - Supply of financial capital = Demand for financial capital - expressed in algebraic terms? a. (M - X) = I - S - (T - G) b. S + (M - X) = I + (G - T) c. X - M = S + (G - T) - I d. I - S - (T - G) = (M - X)

S + (M - X) = I + (G - T)

Which of the following countries suffered deep recessions as a result of pessimistic foreign investors moving their money to other countries? a. Russia, and Indonesia b. Thailand, Argentina and Malaysia c. North Korea and Malaysia d. South Korea and a and b

South Korea and a and b

A country's current national savings and investment identity is expressed in algebraic terms as I - S - (T - G) = (M - X). Assume that the level of domestic investment in a country rises, while the level of private and public saving remains unchanged. In this instance, the rise in domestic: investment will mean:

a higher trade deficit

Only one of the following statements about trade surplus and capital flow is correct. Which one is it?

a trade surplus means that there is a net outflow of capital

A country's current national savings and investment identity is expressed in algebraic terms as I - S - (T - G) = (M - X). Assume that the level of domestic savings rises, while the level of domestic investment and private saving remains unchanged. In this instance:

all of the above

From an economic perspective, returns on foreign investment are included in the overall measure of trade because financial investments:

are a form of trade that takes place in the financial capital market

If exports and imports:

are equal, then trade is balanced.

Which of the following terms is sometimes used to describe the balance of trade?

balance of payments

The ________________ refers to the gap that can exist between what a nation's _____________, and a nation's ____________________.

balance of trade; producers sell abroad; imports

When did the U.S. current account balance experience the largest surplus?

before the 1980s

Trade surpluses and trade deficits can be __________________ for an economy in certain circumstances.

beneficial & harmful either a or b

With respect to the national saving and investment identity for any country, the quantity of ________ at any given time by savings must _______ for purposes of making investments.

financial capital supplied; equal the quantity of capital financial demanded

In the United States, which of the following government institutions would most likely provide economists with the basic data for merchandise trade?

census bureau

What is the most common method of measuring flows of trade?

comparing exports of goods, services, and financial capital between countries

Economists typically rely on a broader measure of international trade known as the ____________, which includes ____________.

current account balance; goods, services, international income flows, and foreign aid

Economists typically rely on a broader measure of international trade known as the ___________________, which includes _____________________________.

current account balance; goods, services, international income flows, and foreign aid

From a macroeconomic perspective, if GDP economic indicators show a decline of10% or more in a single year, then which of the following outcomes is most likely to result?

deep economic recession

A government finds itself in the following situation: a government budget deficit of $900; total domestic savings of $2000, and total domestic physical capital investment of $1300. According to the national saving and investment identity, if investment increases by $200 while the government budget deficit decreases by $100 and savings remain the same, what will happen to the current account balance?

deficit increases from $200 to $300

A country finds itself in the following situation: the government budget surplus is 2% of its GDP; private savings is 30% of GDP; and physical investment is 33% of GDP. Based on the national saving and investment identity, if the government budget surplus falls to zero, what will happen to this country's current account balance?

deficit increases from 1% to 3% of GDP

A country finds itself in the following situation: the government budget surplus is 2%of its GDP; private savings is 30% of GDP; and physical investment is 33% of GDP. Based on the national saving and investment identity, if the government budget surplus falls to zero, what will happen to this country's current account balance?

deficit increases from 1% to 3% of GDP

A country finds itself in the following situation: the government budget surplus is 2% of its GDP; private savings is 30% of GDP; and physical investment is 33% of GDP. Based on the national saving and investment identity, if private savings fall to zero, what will happen to this country's current account balance?

deficit increases from 1% to 31% of GDP

A country finds itself in the following situation: the government budget surplus is 2%of its GDP; private savings is 30% of GDP; and physical investment is 33% of GDP. Based on the national saving and investment identity, if private savings fall to zero, what will happen to this country's current account balance?

deficit increases from 1% to 31% of GDP

A country finds itself in the following situation: a government budget deficit of $800;total domestic savings of $1800, and total domestic physical capital investment of $1300.According to the national saving and investment identity, what is the current account balance?

deficit of $300

A country finds itself in the following situation: the government budget surplus is 2%of its GDP; private savings is 30% of GDP; and physical investment is 33% of GDP. Based on the national saving and investment identity, what is this country's current account balance?

deficit of 1% of GDP

One of the following must be used as a starting point in order to perform an analysis that will determine what the connections between imbalances of trade in goods and services and the flows of international financial capital are. Which one is it? a. sketch patterns of trade deficits b. sketch patterns of trade surpluses c. define the level of trade d. define the balance of trade

define the balance of trade

In the U.S., all companies involved in international flows of capital must file reports, which are ultimately compiled by the:

department of the Treasury

A country's current national savings and investment identity is expressed in algebraic terms as (M - X) = I - S - (T - G). In this instance:

domestic investment is higher than domestic savings

The two main sources for the supply of capital in the U.S. economy are:

domestic savings from individuals and firms and inflows of financial capital from foreign investors

In what way are the factors used to calculate the current account balance similar to each other?

each involves a flow of financial payments between countries

One insight that can be obtained from the national saving and investment identity is that a nation's balance of trade is determined by:

each nation's own levels of domestic saving and domestic investment

A country's trade in manufactured goods diminished substantially, causing it to lose tax revenue and become a net borrower of foreign funds. For the next two decades, its government used the borrowed funds to upgrade the nation's waste-water treatment plants and to develop efficient rapid transit systems, creating substantial gainful employment for its workforce. Thereafter, the country began to quickly repay its past borrowing debt. Which of the following most strongly supported this country's successful economic recovery?

ensuring borrowed funds were invested in long-term productive economic assets

If imports ______________, then the economy is said to have a trade deficit.

exceed exports

If exports ______________, then the economy is said to have a trade surplus.

exceed imports

From a macroeconomic perspective, a payment made by a foreign firm to a U.S.investor looks just like an:

export of a service

Goods and services produced in one country that are then sold in other countries are called ____________.

exports

When some countries increase their imports as a result of worldwide economic growth, other countries must be increasing their:

exports as demand in all countries substantially rises

Only one of the following statements about the trade surplus is correct. Which one is it?

generating a trade surplus and an overall net inflow of capital is impossible

A country's current account balance refers to a broad measure of the balance of trade that includes:

goods and services, international flows of income, and foreign aid

At the outset of the 21st century, most global trade took the form of:

goods, rather than services

The term __________ is used to describe what those in one country buy from those in other countries.

imports

In 2009, because U.S. imports were $2,535 billion while exports were $2,116 billion:

imports exceeded exports by a sizeable $419 billion

To a macroeconomist, a trade deficit is synonymous with which of the following?

inflow of financial capital

The extent to which a national economy is involved in global trade: a. the issue of whether the economy has a substantial trade imbalance. b. is not very strongly related to the underlying economic meaning of trade imbalances. c. is not very strongly related to either a or b above. d. is very strongly related to both a and b above.

is not very strongly related to either a or b above

If a country's current account balance is zero and the financial payments flowing in and out of the country's economy are equal, then which of the following must be a true statement? a. it has an overall or net outflow of financial investment b. its government is not indebted to other governments c. it has an overall or net inflow of financial investment d. it is not an overall or a net investor in other countries

it is not an overall or a net investor in other countries

The statement that GDP = C + I + G + X - M is an identity, because ____________.

it is true according to the definition of GDP

Under what conditions would a nation be viewed as being neither a net borrower nor a net lender in the international economy?

its trade balance is zero

The national saving and investment identity teaches that the rest of the economy can absorb an inflow of foreign financial capital by:

leaving domestic saving and investment unchanged using any of the above

In most high-income economies, including the United States, goods currently makeup ___________, while services currently compose ____________.

less than half of total production; more than half of total production

An economics professor is discussing a measure of trade that involves a comparison of exports and imports of goods for the year just ended. What name is given to this measurement?

merchandise trade balance

Which of the following would most likely be included in the negative side of the current account balance?

money earned by Canadian firms in the U.S

Which of the following would most likely be included in the positive side of the U.S. current account balance?

money earned by U.S. firms in Europe

Which of the following represents a financial inflow to the U.S. economy?

returns paid on U.S. financial investments in Switzerland

Which of the following represents a financial inflow to the U.S. economy? a. returns paid on U.S. financial investments in Switzerland b. computer chip imports from Israel c. oil imports from Canada d. foreign aid from the U.S. to Ethiopia

returns paid on U.S. financial investments in Switzerland

Which of the following will strongly influence a nation's level of trade? a. size of its economy, its geographic location, and its history of trade b. size of its government, its history of trade, and its geographic location c. government trade policy, its history of trade, and the size of its economy d. ratio of exports to GDP, balance of trade, and government trade policy

size of its economy, its geographic location, and its history of trade

The surge in international trade related to services to be performed in one country and sold in another that began in the 1990s has been powered by which of the following? a. technological advances b. telecommunications c. computers d. customer service, finance, law

technological advances

The term "merchandise trade balance" is used to describe:

the balance of trade in goods

Assume that the level of domestic investment in a country rises, while the level of private and public saving remains unchanged. In these circumstances:

the rise in domestic investment will mean a higher trade deficit

Which of the following accurately reflects the pattern of the U.S. current account balance during the periods: 1991; the late 1990s through to the mid-2000s; and 2009 following the onset of recession?

tiny surplus; larger deficit; deficit declined

Why would an analyst include, among other things, airplane parts, legal services and software, in an analysis of international economic trade?

to determine the current account balance

The term ______ describes circumstances where a country's imports exceed its exports.

trade deficit

A period of strong economic growth tends to make a __________________.

trade deficit larger

A recession tends to make a _____________________.

trade deficit smaller

From a macroeconomic perspective, an economic transaction in the form of a financial investment is synonymous with which of the following?

trade in the financial capital market

The term ______ describes circumstances where a country's exports exceed its imports.

trade surplus

Under what circumstances would it most likely be considered beneficial for a government to be a large borrower of foreign investment capital?

when those funds are invested in a way that sustains economic growth over time