International Economics Final

International Economics Final The Balance of Payments is: a) a record of all the transactions between the citizens of a nation and the rest of the world during one year. b) a measure of the economic power of nations relative to the world. c) a record of how much a nation owes the world. d) a measure of the national profit; if the value of exports exceeds the value of imports the Balance of Payments is positive. e) the negative of the Balance of Trade, since all transactions require a payment that moves in the opposite direction of the good or service. - a) a record of all the transactions between the citizens of a nation and the rest of the world during one year. The overall US balance of payments must balance because: a) current account deficits automatically cause the exchange rate to weaken. b) every transaction involves a corresponding payment; hence every credit generates a debit and vice versa. c) this is required by the accounting rules of the International Monetary Fund. d) exports of goods automatically create imports. e) FALSE. The US runs a chronic balance of payments deficit. - b) every transaction involves a corresponding payment; hence every credit generates a debit and vice versa. On the balance-of-payments statements, merchandise imports are recorded in the: a) current account b) financial account c) capital account d) unilateral transfer account e) official settlements account - a) current account The current account of the US balance of payments does not include: a) investment income b) merchandise exports and imports c) the sale of securities to foreigners d) unilateral transfers - c) the sale of securities to foreigners The US 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 e) False. Trade always balances, by definition. - d) goods and services imports exceed its goods and services exports An economic transaction is entered into the Balance of Payments as a credit if it results in: a) a payment to foreigners b) the receipt of a payment from foreigners c) either a payment to foreigners or receipt of payment from foreigners d) neither a payment to foreigners nor a receipt of payment from foreigners e) balanced trade - b) the receipt of a payment from foreigners Which of the following entries is a debit (-) in the US BOP account? a) The purchase of US government securities by the Chinese government b) The payment of tuition by a Mexican citizen to a US university c) The purchase of Apple shares by a Japanese citizen d) The import of a Jaguar from the UK by a US citizen e) The payment of interest by a UK bank by a US citizen - d) The import of a Jaguar from the UK by a US citizen Which of the following entries is a credit (+) in the US BOP account? a) A US citizen paying tuition to a medical school in Grenada b) The purchase of British government bond by a US citizen c) The purchase of a US government bond by a Canadian citizen d) A US family has a vacation in France e) A US bank pays interest to a Saudi family - c) The purchase of a US government bond by a Canadian citizen Chinese purchasers of US government bonds are recorded in the Balance of Payments as credits because: a) they are imports of IOUs b) they are exports of IOUs c) the US has a comparative advantage in borrowing from foreigners d) False. Chinese lending to the US is recorded as a debit e) False. Foreign lending is not recorded in the Balance of Payments - b) they are exports of IOUs If a nation's investment exceeds its national (private + government) saving, the Balance of Trade: a) must necessarily be in deficit b) might be in deficit if interest rates are high enough to attract foreign lending c) might be in surplus because the investment will make manufacturing more efficient d) will be unaffected, since the Current Account is a record of international, not domestic, transactions e) must necessarily be in surplus - a) must necessarily be in deficit How is it possible for a nation to absorb more goods and services than it produces? a) It is not possible b) It must save more than it invests c) It must produce more than it saves d) The government must take control of production e) It must borrow from foreigners, draw down savings held in foreign accounts, or receive gifts from abroad - e) It must borrow from foreigners, draw down savings held in foreign accounts, or receive gifts from abroad