The Balance of Payments

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1.Which of the following statements about the balance of payments is accurate?

A surplus in the current account guarantees a surplus in the capital account.A deficit in the current account implies a deficit in the capital account as well.The total of all balance of payments entries must always be a positive number.The sum of all entries in the balance of payments must equal zero.

2.What term describes the difference between a nation's exports and imports of goods?

3.What is required to reconcile discrepancies in the balance of payments accounts?

4.What does the balance of trade specifically measure?

The trade of financial assets including exports and importsThe sum of the current account and the capital accountThe overall net exports of goods and services combinedThe difference between the value of physical goods exported and imported

5.Which economic pattern is commonly observed in countries during the initial phases of rapid economic growth?

A trade deficit combined with investment levels exceeding domestic savingsA trade surplus along with investment surpassing domestic savingsTrade deficits accompanied by domestic savings being higher than investmentTrade surpluses with domestic savings exceeding investment

6.What does it indicate when a nation experiences a trade deficit?

It buys a greater amount of foreign stocks and bonds than it sells.It imports more products from other countries than it exports.It exports more products to other countries than it imports.It sells more foreign stocks and bonds than it buys.

7.What does a surplus in the current account indicate about a country?

The nation is a net lender to other countriesThe country has a net surplus in its capital accountForeign investments in the country's securities are minimalAll the statements above are true

8.What does it indicate when a country has a current account deficit?

It is providing more loans to foreign countriesIt is enjoying a surplus in its exports of goods and servicesIt is decreasing the amount it owes to other countriesIt is increasing its borrowing from foreign nations

9.How does a country's balance of payments differ from its balance of international indebtedness?

It corresponds to changes in official reserve assetsIt results from variations in foreign currency exchange ratesIt is due to errors and omissions in data reportingIt arises because one measures flows while the other measures stocksIt is caused by differences in trade policies

10.Under which category in the balance of payments are travel and tourism recorded?

One-way transfersCapital transactionsGoods tradeService transactions