ECO 305 Week 8 Quiz – Strayer
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Quiz 7 Chapter 10 and 11
CHAPTER 10
THE BALANCE OF PAYMENTS
MULTIPLE CHOICE
1. 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
2. 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
3. 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
4. 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
5. 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
6. 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
7. 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
Table
10.1 gives hypothetical figures for U.S. International Transactions.
Table
10.1. U.S. International Transactions
Amount
Transaction (billions of dollars)
Merchandise
imports 110
Military
transactions, net -5
Remittances,
pensions, transfers -20
U.S.
private assets abroad -50
Merchandise
exports 115
Investment
income, net 15
U.S.
government grants -5
(excluding
military)
Foreign
private assets in the U.S. 25
Compensation
of employees -5
Allocation
of SDRs 5
Travel
and transportation receipts, net 20
8. Referring
to Table 10.1, the goods and services balance equals:
a. $5 billion
b. $15 billion
c. $20 billion
d. $25 billion
9. Referring
to Table 10.1, the current account balance equals:
a. $5 billion
b. $10 billion
c. $15 billion
d. $20 billion
10. 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
11. 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
12. 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
13. 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
14. 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
15. 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
16. 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
17. 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
18. 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
19. 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
20. 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
Table
10.2. International Investment Position of the United States
U.S.
assets abroad
U.S. government assets $800 billion
U.S. private assets $200 billion
Foreign
assets in the U.S.
Foreign official assets $600 billion
Foreign private assets $300 billion
21. Consider
Table 10.2. The U.S. balance of international indebtedness suggests that the
United States is a net:
a. Debtor
b. Creditor
c. Spender
d. Exporter
22. 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
23. 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
24. 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
25. 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
26. 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
27. 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
28. 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
29. 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
30. 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
31. 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
32. 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
33. 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
34. 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
35. 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
36. 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
37. 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
38. 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
TRUE/FALSE
Table
10.3 shows hypothetical transactions, in billions of U.S. dollars, that took
place during a year.
Table
10.3. International Transactions of the United States
Amount
(billions
of dollars)
Transaction
Allocation
of SDRs 10
Changes
in U.S. assets abroad 100
Statistical
discrepancy -15
Merchandise
imports -400
Payments
on foreign assets in U.S. -20
Remittances,
pensions, transfers -60
Travel
and transportation receipts, net 30
Military
transactions, net -10
Investment
income, net 100
Merchandise
exports 350
U.S.
government grants (excluding military) -20
Changes
in foreign assets in the U.S. 190
Other
services, net 80
Receipts
on U.S. investments abroad 30
Compensation
of employees -10
1. Refer
to Table 10.3. The merchandise-trade balance registered a deficit of $50
billion.
2. Refer
to Table 10.3. The services balance registered a surplus of $100 billion.
3. Refer
to Table 10.3. The goods-and-services balance registered a surplus of $50
billion.
4. Refer
to Table 10.3. The unilateral-transfers balance registered a deficit of $40
billion.
5. Refer
to Table 10.3. The current-account balance registered a surplus of $30 billion.
6. Refer
to Table 10.3. The "net exports" component of the U.S. gross domestic
product registered $-110 billion.
7. Refer
to Table 10.3. The payments data suggest that the United States was a "net
demander" of $30 billion from the rest of the world.
8. The
balance of payments refers to the stock of trade and investment transactions
that exists at a particular point in time.
9. Referring
to the balance-of-payments statement, an international transaction refers to
the exchange of goods, services, and assets between residents of one country
and those abroad.
10. The
balance of payments includes international transactions of households and
businesses, but not government.
11. Because
the balance of payments utilizes double-entry accounting, merchandise exports
will always be in balance with merchandise imports.
12. On
the U.S. balance-of-payments statement, the following transactions are credits,
leading to the receipt of dollars from foreigners: merchandise exports,
transportation receipts, income received from investments abroad, and
investments in the United States by foreign residents.
13. On
the U.S. balance of payments, the following transactions are debits, leading to
payments to foreigners: merchandise imports, travel expenditures, gifts to
foreign residents, and overseas investments by U.S. residents.
14. The
"goods and services" account of the balance of payments shows the
monetary value of international flows associated with transactions in goods,
services, and unilateral transfers.
15. An
increase in import restrictions by the U.S. government tends to promote a
merchandise-trade surplus.
16. Services
transactions on Canada's balance-of-payments statement would include Canadian
ships transporting lumber to Japan, foreign tourists spending money in Canada,
and Canadian engineers designing bridges in China.
17. On
the balance-of-payments statement, dividend and interest income are classified
as capital-account transactions.
18. A
surplus on Germany's goods-and-services balance indicates that Germany has sold
more goods and services to foreigners than it has bought from them over a
one-year period.
19. The
merchandise-trade account on the balance-of-payments statement is defined the
same way as "net exports" which constitutes part of the nation's
gross domestic product.
20. A
positive balance on the goods-and-services account of the balance of payments
indicates an excess of exports over imports which must be added to the nation's
gross domestic product.
21. For
the United States, merchandise trade has generally constituted the largest
portion of its goods-and-services account.
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