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

11.Which agency is responsible for compiling the United States balance of payments?

The U.S. Department of LaborThe U.S. Department of AgricultureThe U.S. Department of CommerceThe President's Council of Economic Advisers

12.Which type of flow is responsible for channeling the savings of one country into the investments of another?

13.Which of the following is NOT recorded as a debit entry in the balance of payments?

Funds sent abroad as investmentsExports of goodsPrivate donations made to foreign recipientsForeign aid provided to other countries

14.Which record tracks a nation's economic exchanges with other countries?

15.What happens when all debit and credit entries in the balance of payments are summed together?

The value of goods imported matches the value of goods exportedThe inflow of capital equals the outflow of capitalThe amount earned from services exports equals the amount spent on services importsThe overall balance shows neither a surplus nor a deficit

16.In the balance of payments, credit entries represent transactions that involve what?

earnings received from foreign entitiesoutflows of funds paid to foreign partiesan expansion of the local currency supplya reduction in the need for foreign currency

17.During the mid-1980s, the United States became a net international what for the first time since World War I?

18.What term describes the difference between the current account balance and the capital account balance?

statistical discrepancybalance of paymentstrade balancetrade shortfall

19.Which of the following statements is accurate?

The total of all entries in the balance of payments is always positive.A nation has a current account surplus when it sells more foreign assets than it purchases from abroad.A capital account deficit occurs when a country imports more goods than it exports.A surplus in the current account implies a deficit in the capital account.

20.Which two primary accounts make up the balance of payments?

Current account and capital accountCurrent account and trade accountTrade account and capital accountCurrent account and reserve account