Question 1

A nation's balance of trade on goods is equal to its exports of goods less its imports of

Accepted Answer

A nation's balance of trade on goods is calculated by subtracting its imports of goods from its exports of goods.

Question 2

The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All figures are in billions of dollars. The balance of trade in goods and services was a(n)

Accepted Answer

The answer of  The accompanying table contains hypothetical data...

Question 3

The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All figures are in billions of dollars. The data indicate that there was a trade

Accepted Answer

The answer of  The accompanying table contains hypothetical data...

Question 4

Which one of the following is part of the financial account on the U.S. balance of payments?

Accepted Answer

The financial account on the U.S. balance of payments includes transactions that involve the purchase or sale of assets, such as U.S. purchases of assets abroad.

Question 5

In one year the United States had a current account deficit of $461 billion. The balance on the capital account was −$8 billion. What was the balance on the financial account?

Accepted Answer

The balance on the financial account is the opposite of the sum of the current account and capital account balances. Therefore, it is +$469 billion ($461 billion current account deficit + $8 billion capital account deficit = $469 billion financial account surplus).

Question 6

A nation's annual balance of payments statement must always balance because

Accepted Answer

All international transactions, whether they involve goods, services, or financial assets, must eventually be settled, meaning there must be a balance between the inflows and outflows of a nation's transactions with the rest of the world. This includes trade, investment income, and financial transfers.

Question 7

When a U.S. agribusiness company sells 10,000 units of cow vaccine to a company in France, this transaction will represent a(n)

Accepted Answer

When a U.S. company sells goods abroad, in this case, cow vaccines to France, it represents an export of goods. Exports are recorded as an inflow of money on the current account of the U.S. balance of payments, as they increase the demand for U.S. goods and bring money into the country.

Question 8

Remittances of Mexican workers in the U.S. to their families in Mexico are included in the U.S. balance of payments in the section on

Accepted Answer

Remittances from workers in the U.S. to their families in Mexico are considered unilateral transfers, which are recorded in the current account under net transfers.

Question 9

Which of the following appears as a positive item on the balance of payments accounts for the United States?

Accepted Answer

The purchase of U.S. Treasury bonds by a foreign bank is considered a financial inflow and appears as a positive item on the balance of payments, as it represents foreign investment in the U.S.

Question 10

The current account on a nation's balance of payments statement includes all of the following except

Accepted Answer

The current account includes transactions related to trade in goods and services, net investment income, and current transfers. Net purchases of assets abroad fall under the capital and financial account.

Question 11

A nation's current account balance is equal to its exports less its imports of

Accepted Answer

The current account balance of a nation is calculated as its exports minus its imports of goods and services, plus net investment income (such as dividends and interest from abroad) and net transfers (such as foreign aid). This encompasses a broader range of transactions than just trade in goods and services.

Question 12

Which of the following is an item in the current account balance of the United States?

Accepted Answer

The purchase of insurance by a foreign company falls under the services component of the current account balance. The purchase of a U.S. company or stock in a foreign corporation by a U.S. company would fall under the capital account balance. The purchase of a Treasury bond by a foreigner falls under the financial account balance.

Question 13

When a U.S. company purchases a factory in Singapore, this will be a

Accepted Answer

When a U.S. company purchases a factory in Singapore, it represents an outflow of capital from the U.S. to Singapore. This transaction is recorded in the financial account of the U.S. balance of payments, reflecting the investment abroad by a U.S. entity.

Question 14

A trade deficit means a net

Accepted Answer

A trade deficit occurs when a country imports more goods and services than it exports, resulting in a net inflow of goods and services.

Question 15

In the balance of payments statement, a current account surplus will be matched by a

Accepted Answer

A current account surplus indicates that a country is exporting more than it is importing. This surplus must be balanced by a net outflow in the capital and financial accounts, meaning a deficit in these accounts, as funds flow out of the country to invest in foreign assets or pay off debts.

Question 16

Which of the following shows the net difference between how much Americans forgave in debts owed to them by foreigners compared with how much foreigners forgave debts owed to them by Americans?

Accepted Answer

The answer of Which of the following shows the net...

Question 17

When a U.S. importer buys 100,000 pairs of pants from a Hong Kong company, this transaction will represent a(n)

Accepted Answer

When a U.S. importer buys goods from abroad, in this case, 100,000 pairs of pants from a Hong Kong company, it represents an import transaction. This leads to an outflow of money from the U.S. as payment for the imported goods, which is recorded on the current account of the U.S. balance of payments.

Question 18

Official reserves used to achieve a balance of payments between nations engaging in international trade are held by

Accepted Answer

Central banks of the nations engaged in trade hold official reserves, which are assets that can be used to finance payment imbalances or to influence exchange rates. These reserves typically include foreign currencies, gold, and special drawing rights (SDRs).

Question 19

Which of the following transactions represents an inflow of money on the financial account of the U.S. balance of payments?

Accepted Answer

A financial account inflow occurs when money flows into a country, such as when foreign entities invest in that country. In this case, a Canadian firm increasing its direct investment in its U.S. branch represents an inflow of money into the U.S., as it involves foreign capital being invested in the U.S. economy.

Question 20

When a Japanese company buys a U.S. software company, this transaction will be a(n)

Accepted Answer

When a Japanese company buys a U.S. software company, it represents an inflow of money into the United States, which is recorded on the financial account of the U.S. balance of payments. This reflects the investment from abroad into U.S. assets.

Quiz 27: The Balance of Payments, Exchange Rates, and Trade Deficits