Test Bank for Macroeconomics, 18th Canadian Edition by Christopher Ragan

The chapters in this document are displayed in reversed order, with the last chapter appearing first.
This change ensures all chapters are included in the test bank. Ch 1 to 19 Included.

Macroeconomics, 18Ce (Ragan)
Chapter 19 Exchange Rates and the Balance of Payments

19.1 The Balance of Payments

1) What is a "credit entry" in Canada's balance-of-payments accounts?
A) any transaction that involves a payment to other nations
B) any transaction that involves a receipt from other nations
C) any foreign-exchange transactions by a domestic resident
D) any foreign-exchange transactions by a foreign resident
E) any transaction by the central bank in the official financing accounts
Answer: B
Diff: 1 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative

2) What is a "debit entry" in Canada's balance-of-payments accounts?
A) any transaction that involves a payment to other nations
B) any transaction that involves a receipt from other nations
C) any foreign-exchange transactions by a domestic resident
D) any foreign-exchange transactions by a foreign resident
E) any transaction by the central bank in the official financing accounts
Answer: A
Diff: 1 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative

3) When a Japanese firm buys Canadian lumber, this transaction appears as a
A) debit on the Canadian capital account.
B) credit on the Japanese capital account.
C) credit on the Canadian current account.
D) credit on the Japanese current account.
E) debit on Canada's trade account.
Answer: C
Diff: 2 Type: MC
Topic: 19.1a. the balance of payments
Skill: Applied
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative




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,4) A debit entry in the Canadian balance-of-payments accounts
1) is a credit in the balance-of-payments accounts for foreign countries;
2) arises when Canadian assets are sold to foreigners;
3) typically results in more foreign exchange being held by foreigners.
A) 1 only
B) 2 only
C) 3 only
D) 1 and 2
E) 1 and 3
Answer: E
Diff: 2 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative

5) A credit entry in the Canadian balance-of-payments accounts
1) is a credit in the balance-of-payments accounts for foreign countries;
2) occurs when Canadians receive investment income from foreign countries;
3) is any transaction that results in a payment to other nations.
A) 1 only
B) 2 only
C) 3 only
D) 1 and 2
E) 2 and 3
Answer: B
Diff: 3 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative

6) Which of the following is true? A credit entry in the Canadian balance-of-payments accounts
A) is any transaction that results in a payment to other nations.
B) typically results in more foreign exchange being held by foreigners.
C) is a credit in the balance-of-payments accounts for foreign countries.
D) arises when Canadian assets are sold to foreigners.
E) arises when Canadians purchase assets from foreigners.
Answer: D
Diff: 2 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative




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,7) Payments made to foreign firms arising from Canadians' purchases of foreign goods and services are
shown in Canada's
A) capital account.
B) current account.
C) official financing account.
D) capital-service account.
E) foreign-currency reserves.
Answer: B
Diff: 2 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative

8) Canadian firms' receipts from foreign consumers arising from the exports of goods and services are
shown in Canada's
A) investment account.
B) capital account.
C) official financing account.
D) trade account.
E) capital-service account.
Answer: D
Diff: 2 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative

9) Which of the following statements about Canada's balance of payments is correct?
A) If the current account is in deficit, the capital account must also be in deficit.
B) The current account balance must be zero.
C) The trade account balance must be zero.
D) Total payments must equal total receipts.
E) If the current account is in surplus, the capital account must also be in surplus.
Answer: D
Diff: 1 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative




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, 10) A summary record of a country's transactions with the rest of the world, including the buying and
selling of goods, services, and assets is called the
A) capital-service account.
B) trade account.
C) balance of payments accounts.
D) current account.
E) capital account.
Answer: C
Diff: 2 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative

11) Which of the following statements about Canada's balance of payments is correct?
A) If the current account is in deficit, the capital account must also be in deficit.
B) The current account balance must be zero.
C) The current account balance plus the capital account balance must be zero.
D) The trade account plus the capital account must equal the official financing account.
E) The capital account balance must be zero.
Answer: C
Diff: 2 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative

12) The capital-service account in Canada's balance-of-payments is the section of the ________ which
records the ________.
A) capital account; net change in Canadian investments abroad and the net change in foreign investments
in Canada
B) capital account; foreign-exchange reserves held by the Bank of Canada
C) current account; interest charges and earnings of Canadian importers and exporters
D) current account; income paid to foreign owners of assets in Canada and income received by Canadians
for assets located abroad
E) current account; financial reserves held by the Bank of Canada which they can use in the foreign-
exchange market
Answer: D
Diff: 3 Type: MC
Topic: 19.1a. the balance of payments
Skill: Recall
Learning Obj: 19-1 List the components of Canada's balance of payments and explain why the balance of payments
must always balance.
Category: Qualitative




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