ECON 380 chapter 10

Refer to Table 10.1. The goods and services balance equals: a. $5 billion b. $15 billion c. $20 billion d. $25 billion

$5 billion

Refer to Table 10.1. The capital account balance equals: a. -$50 billion b. -$25 billion c. $25 billion d. $50 billion

-$25 billion

Refer to Table 10.1. The overall balance of payments equals: a. -$30 billion b. -$20 billion c. $90 billion d. $190 billion

-$30 billion

Refer to Table 10.1. The current account balance equals: a. -$5 billion b. -$10 billion c. -$15 billion d. -$20 billion

-$5 billion

Which of the following is an example of a capital outflow into the US? A) An increase of U.S. assets held by foreign investors B) A decrease of U.S. assets held by foreign investors C) An increase in US foreign asset holdings D) Importing of goods and services

A) An increase of U.S. assets held by foreign investors

______ are balance of payments transactions involving payments to foreigners. A) Debit transactions B) Credit transactions C) Accommodating transactions D) Autonomous transactions

A) Debit transactions

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? A) Goods export-credit of $7,000; Capital account-debit of $7,000 B) Accounts Receivable - debit of $7,000; Inventory - credit of $7,000 C) Goods export - debit of $7,000; Capital account - credit of $7,000 D) Accounts Receivable-credit of $7,000; Inventory-debit of $7,000

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

Which of the following is a definition of a deficit in the balance of payments? A) The excess of debits over credits in the current and capital accounts B) The excess of credits over debits in the current account C) The excess of credits over debits in the capital account D) Both b&c

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

Which of the following is false? a. a net debit balance in the current and capital accounts measures the surplus in the nation's balance of payments b. a balance of payments deficit must be settled by a net credit in the official reserve account c. a deficit in the balance of payments can be measured by the excess of credits over debits in the official reserve account d. a net debit balance in the official reserve account refers to a balance of payments surplus

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

______ are international transactions that take place for business or profit motives and independent of balance-of-payments considerations. A) Automatedtransactions B) Autonomous transactions C) Accommodating transactions D) Below-the-line-transactions

Autonomous transactions

______ are balance of payments transactions involving the receipt of payments from foreigners. A) Debit transactions B) Credit transactions C) Accommodating transactions D) Autonomous transactions

B) Credit transactions

If the US government sells military hardware to the U.K., the transaction would be recorded on the US 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

In which of the following is a statistical discrepancy likely to occur? A) Sales and purchases of goods and services B) Short term private capital flows C) Unilateral transfers D) Gifts made to foreigners and vice versa

B) Short term private capital flows

Which of the following is false? a. a credit transaction leads to a payment from foreigners b. a debit transaction leads to a payment to foreigners c. a credit transaction is entered with a negative sign d. double-entry bookkeeping refers to each transaction entered twice on the balance of payments account, with opposite signs and equal magnitudes.

C) a credit transaction is entered with a negative sign

Which of the following is an example of a capital inflow for the US? A) An increase of U.S. assets held by foreign investors B) A reduction in US holdings of foreign assets C) An increase in US holdings of foreign assets D) Unilateral transfers from foreigners

C) An increase in US holdings of foreign assets

The balance of payments is the sum of which of the following? A) Current account balance B) Current account balance + capital account balance C) Current account balance + capital account balance + statistical discrepancy D) None of the above

C) Current account balance + capital account balance + statistical discrepancy

In 2002, the largest U.S. bilateral trade deficit was with: A) Canada B) China C) Japan D) German

China

A nation's balance of payments is crucial in the development of: A) fiscal policy B) monetary policy C) trade Policy D) all of the other answers

D

Accommodating items are: a. transactions in official reserve assets b. the items below the line c. needed to balance international transactions d. all of the above

D

Capital inflows: a. refer to an increase in foreign assets in the nation b. refer to a reduction in the nation's assets abroad c. lead to a payment from foreigners d. all of the above

D

The sharp deterioration of the US trade balance on goods after the 1970's was due in large part to which of the following? A) The sharp rise in the price of imported petroleum products during the 1970s B) The high international value of the dollar in the 1980s C) The more rapid growth of the United States than Europe and Japan during the 1990s D) All of the above

D

Which of the following are included in the current account? A) Currently produced goods and services B) Income on foreign investments C) Unilateral transfers D) All of the above

D

Which of the following does the international investment position consider? A) The total amount of a nation's assets abroad at the end of the year B) The distribution of a nation's assets abroad at the end of the year C) The foreign assets in the nation at the end of the year D) All of the above

D

Which of the following is consistent with a surplus in the balance of payments? A) The excess of debits over credits in the current and capital accounts B) The excess of credits over debits in the current account C) The excess of credits over debits in the capital account D) Both b&c

D

Which of the following statements is correct with regard to the United Stated becoming a net debtor nation a. it allowed the United States to grow faster b it helped finance some of the U.S. budget deficits c. it created the risk that foreigners may suddenly withdraw their investments in the U.S. d. all of the above.

D

______ is an example of a credit transaction in the balance of payments. A) Exports of goods and services B) Unilateral transfers from foreigners C) Capital inflows D) All of the above

D

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? A) Common stock-credit of $900; Cash-debit of $900 B) Capital account - credit of $900; Capital account - debit of $900 C) Common stock - debit of $900; Cash - credit of $900 D) Capital account-debit of $900; Capital account-credit of $900

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

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 trade exports C) Obtain an accurate account of the trade deficit D) Obtain an accurate account of the balance of payments deficit

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

______ indicates the international investment position of a country at a given point 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

The balance of international indebtedness

Which of the following must be considered when examining a nation's balance of payments? A) Too much attention is placed on the balance of goods, and on focusing on short-term data. B) International transactions are independent so that an attempt to reduce the US trade deficit with one nation doesn't affect the surplus the US has with another. C) Measuring the deficit in the balance of payments is strictly correct under a flexible exchange rate system and not under a fixed exchange rate system. D) None of the above

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

Which of the following is classified as a credit in the US balance of payments? A) US exports B) US gifts to other countries C) AflowofgoldoutoftheUS D) Foreign loans made by US companies

US exports

When a U.S. firm exports goods to be paid in three months the U.S. debits: a. the current account b. unilateral transfers c. capital account d. official reserves

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: a. official reserve account b. unilateral transfers account c. services in its current account d. capital account

capital account

The capital account of the U.S. includes: a. the change in U.S. assets abroad and foreign assets in the U.S., including official reserve assets b. the change in U.S. assets abroad and foreign assets in the U.S., other than official reserve assets c. all financial assets d. all but current account transactions

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