Question 1

Answer the question on the basis of the following 2012 balance of payments data (+ and -) for the hypothetical nation of Zabella.All figures are in billions of dollars.  Current Account1)  Goods Exports2)  Goods Imports3)  Exports of Services4)  Imports of Services5)  Net Investment Income6)  Net TransfersFinancial Account7)  Foreign Purchases of Assets in the United States8)  US Purchases of Assets AbroadCapital Account9)  Balance on Capital Account+$80−70+20−25+5−5+13−23+5\begin{array}{c}\begin{array}{lll}	ext {Current Account}\\hline 	ext {1)  Goods Exports}\	ext {2)  Goods Imports}\	ext {3)  Exports of Services}\	ext {4)  Imports of Services}\	ext {5)  Net Investment Income}\	ext {6)  Net Transfers}\\	ext {Financial Account}\\hline 	ext {7)  Foreign Purchases of Assets in the United States}\	ext {8)  US Purchases of Assets Abroad}\\	ext {Capital Account}\\hline 	ext {9)  Balance on Capital Account}\end{array}\begin{array}{r}\\hline+\$ 80 \-70 \+20 \-25 \+5 \-5 \\\\hline+13 \-23\\\\hline+5 \end{array}\end{array}Current Account1)  Goods Exports2)  Goods Imports3)  Exports of Services4)  Imports of Services5)  Net Investment Income6)  Net TransfersFinancial Account7)  Foreign Purchases of Assets in the United States8)  US Purchases of Assets AbroadCapital Account9)  Balance on Capital Account​​+$80−70+20−25+5−5+13−23+5​​​

Refer to the given data.Zabella's balance on goods and services shows a:

Accepted Answer

A)   $5 billion deficit.
B)   $5 billion surplus.
C)   $10 billion surplus.
D)   $15 billion deficit. E) A) and C)
F) A) and B)

Question 2

Which of the following would call for outpayments from the United States?

Accepted Answer

A)   The United States exports computer software.
B)   The United States purchases assets abroad.
C)   Foreigners purchase assets in the United States.
D)   Foreign tourists spend money in the United States.E) A) and B)
F) None of the above

Question 3

Answer the question on the basis of the following 2008 balance of payments statement for Transylvania.All figures are in billions of dollars. $\begin{array}{c}
\begin{array}{lll}
\text { 1) Goods Exports}\
\text { 2) Goods Imports}\
\text { 3) Service Exports}\
\text { 4) Service Imports}\
\text { 5) Net Investment Income}\
\text { 6) Net Transfers}\
\text { 7) Foreign Purchases of Assets}\
\text { 8) Purchases of Foreign Assets}\
\text { 9) Balance on Capital Account}
\end{array}
\begin{array}{r}
+\$ 15 \
-17 \
+5 \
-2 \
-5 \
+4 \
+5 \
-11 \
+1
\end{array}
\end{array}$

Refer to the given data.Transylvania realized a financial and capital account deficit in 2008.

Accepted Answer

A) True 
 B)False

Question 4

In the U.S.balance of payments,foreign purchases of assets in the United States are a:

Accepted Answer

A)   foreign currency outflow.
B)   foreign currency inflow.
C)   current account item.
D)   debit,or outpayment.E) A) and B)
F) A) and C)

Question 5

The exchange rate system currently used by the industrially advanced nations is:

Accepted Answer

A)   the gold standard.
B)   the Bretton Woods system.
C)   the managed float.
D)   a fixed rate system.E) All of the above
F) B) and C)

Question 6

U.S.exports increase and U.S.imports decrease the supplies of foreign monies owned by U.S.banks.

Accepted Answer

A) True 
 B)False

Question 7

Answer the question on the basis of the following 2008 balance of payments statement for Transylvania.All figures are in billions of dollars. $\begin{array}{c}
\begin{array}{lll}
\text { 1) Goods Exports}\
\text { 2) Goods Imports}\
\text { 3) Service Exports}\
\text { 4) Service Imports}\
\text { 5) Net Investment Income}\
\text { 6) Net Transfers}\
\text { 7) Foreign Purchases of Assets}\
\text { 8) Purchases of Foreign Assets}\
\text { 9) Balance on Capital Account}
\end{array}
\begin{array}{r}
+\$ 15 \
-17 \
+5 \
-2 \
-5 \
+4 \
+5 \
-11 \
+1
\end{array}
\end{array}$

Refer to the given data.In 2008 Transylvania realized a $1 billion surplus on goods and services.

Accepted Answer

A) True 
 B)False

Question 8

The following diagram is a flexible exchange market for foreign currency:  Refer to the diagram.Other things equal,a rightward shift of the supply curve would:

Accepted Answer

A)   appreciate the euro.
B)   cause a surplus of euros.
C)   decrease the equilibrium quantity of euros.
D)   appreciate the dollar.E) All of the above
F) A) and D)

Question 9

The plus items below are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo.   1)  Goods Exports 2)  Balance on Capital Account 3)  Net Transfers 4)  Imports of Services 5)  Net Investment Income 6)  US Purchases of Assets Abroad 7)  Goods Imports 8)  Foreign Purchases of Assets in the US 9)  Export of Services+$20000−1000−50−250+150+50\begin{array}{c}\begin{array}{lll}  	ext { 1)  Goods Exports}\  	ext { 2)  Balance on Capital Account}\  	ext { 3)  Net Transfers}\  	ext { 4)  Imports of Services}\  	ext { 5)  Net Investment Income}\  	ext { 6)  US Purchases of Assets Abroad}\  	ext { 7)  Goods Imports}\  	ext { 8)  Foreign Purchases of Assets in the US}\  	ext { 9)  Export of Services} \end{array}\begin{array}{r}+\$ 200 \0 \0 \-100 \0 \-50 \-250 \+150 \+50 \end{array}\end{array} 1)  Goods Exports 2)  Balance on Capital Account 3)  Net Transfers 4)  Imports of Services 5)  Net Investment Income 6)  US Purchases of Assets Abroad 7)  Goods Imports 8)  Foreign Purchases of Assets in the US 9)  Export of Services​+$20000−1000−50−250+150+50​​ 
  Refer to the given information.On the basis of its balance of payments position,and other things equal,we can expect the international value of Zippo's currency to:

Accepted Answer

A)   increase.
B)   decrease.
C)   remain constant.
D)   gyrate up and down. E) B) and C)
F) None of the above

Question 10

If the dollar price of yen rises,then:

Accepted Answer

A)   the yen price of dollars also rises.
B)   the dollar depreciates relative to the yen.
C)   the yen depreciates relative to the dollar.
D)   the dollar will buy fewer U.S.goods.E) None of the above
F) B) and D)

Question 11

The large trade deficit that the United States has with China persists in part because:

Accepted Answer

A)   the U.S.economy has grown slowly in recent years.
B)   China has fixed its exchange rate to a basket of currencies that includes the dollar,and has not allowed the yuan to appreciate relative to the U.S.dollar.
C)   China has experienced rapid economic growth over the past decade.
D)   China has recently imposed or increased tariffs on most goods imported from the United States.E) All of the above
F) A) and C)

Question 12

The plus items below are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo.   1)  Goods Exports 2)  Balance on Capital Account 3)  Net Transfers 4)  Imports of Services 5)  Net Investment Income 6)  US Purchases of Assets Abroad 7)  Goods Imports 8)  Foreign Purchases of Assets in the US 9)  Export of Services+$20000−1000−50−250+150+50\begin{array}{c}\begin{array}{lll}  	ext { 1)  Goods Exports}\  	ext { 2)  Balance on Capital Account}\  	ext { 3)  Net Transfers}\  	ext { 4)  Imports of Services}\  	ext { 5)  Net Investment Income}\  	ext { 6)  US Purchases of Assets Abroad}\  	ext { 7)  Goods Imports}\  	ext { 8)  Foreign Purchases of Assets in the US}\  	ext { 9)  Export of Services} \end{array}\begin{array}{r}+\$ 200 \0 \0 \-100 \0 \-50 \-250 \+150 \+50 \end{array}\end{array} 1)  Goods Exports 2)  Balance on Capital Account 3)  Net Transfers 4)  Imports of Services 5)  Net Investment Income 6)  US Purchases of Assets Abroad 7)  Goods Imports 8)  Foreign Purchases of Assets in the US 9)  Export of Services​+$20000−1000−50−250+150+50​​ 
  Refer to the given information.Zippo has:

Accepted Answer

A)   a current account surplus.
B)   a financial account deficit.
C)   a trade surplus on goods and services.
D)   neither a balance of payments deficit nor a surplus. E) B) and C)
F) A) and B)

Question 13

The plus items below are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo.   1)  Goods Exports 2)  Balance on Capital Account 3)  Net Transfers 4)  Imports of Services 5)  Net Investment Income 6)  US Purchases of Assets Abroad 7)  Goods Imports 8)  Foreign Purchases of Assets in the US 9)  Export of Services+$20000−1000−50−250+150+50\begin{array}{c}\begin{array}{lll}  	ext { 1)  Goods Exports}\  	ext { 2)  Balance on Capital Account}\  	ext { 3)  Net Transfers}\  	ext { 4)  Imports of Services}\  	ext { 5)  Net Investment Income}\  	ext { 6)  US Purchases of Assets Abroad}\  	ext { 7)  Goods Imports}\  	ext { 8)  Foreign Purchases of Assets in the US}\  	ext { 9)  Export of Services} \end{array}\begin{array}{r}+\$ 200 \0 \0 \-100 \0 \-50 \-250 \+150 \+50 \end{array}\end{array} 1)  Goods Exports 2)  Balance on Capital Account 3)  Net Transfers 4)  Imports of Services 5)  Net Investment Income 6)  US Purchases of Assets Abroad 7)  Goods Imports 8)  Foreign Purchases of Assets in the US 9)  Export of Services​+$20000−1000−50−250+150+50​​ 
  Refer to the given information.Zippo has a:

Accepted Answer

A)   current account surplus.
B)   financial account deficit.
C)   financial account surplus.
D)   surplus on goods and services. E) B) and C)
F) A) and D)

Question 14

In a nation's balance of payments,which one of the following items is always recorded as a positive entry?

Accepted Answer

A)   Goods imports.
B)   Changes in foreign currency reserves.
C)   U.S.purchases of assets abroad.
D)   Exports of services.E) A) and B)
F) None of the above

Question 15

The plus items below are "export-type" entries and the minus items are "import-type" entries in the balance of payments for the hypothetical country of Zippo.    1)  Goods Exports 2)  Balance on Capital Account 3)  Net Transfers 4)  Imports of Services 5)  Net Investment Income 6)  US Purchases of Assets Abroad 7)  Goods Imports 8)  Foreign Purchases of Assets in the US 9)  Export of Services+$20000−1000−50−250+150+50\begin{array}{c}\begin{array}{lll}  	ext { 1)  Goods Exports}\  	ext { 2)  Balance on Capital Account}\  	ext { 3)  Net Transfers}\  	ext { 4)  Imports of Services}\  	ext { 5)  Net Investment Income}\  	ext { 6)  US Purchases of Assets Abroad}\  	ext { 7)  Goods Imports}\  	ext { 8)  Foreign Purchases of Assets in the US}\  	ext { 9)  Export of Services} \end{array}\begin{array}{r}+\$ 200 \0 \0 \-100 \0 \-50 \-250 \+150 \+50 \end{array}\end{array} 1)  Goods Exports 2)  Balance on Capital Account 3)  Net Transfers 4)  Imports of Services 5)  Net Investment Income 6)  US Purchases of Assets Abroad 7)  Goods Imports 8)  Foreign Purchases of Assets in the US 9)  Export of Services​+$20000−1000−50−250+150+50​​ 
  Refer to the given information.Zippo has a:

Accepted Answer

A)   current account deficit.
B)   capital account deficit.
C)   balance of payments deficit.
D)   trade surplus on goods and services. E) A) and C)
F) A) and B)

Question 16

The following table contains hypothetical data for the 2012 U.S.balance of payments.Answer the question on the basis of this information.All figures are in billions of dollars.   1)  US Goods Exports +$1002)  US Goods Imports −803)  US Service Exports +404)  US Service Imports −90 5)  Net Investment Income +20 6)  Net Transfers −157)  Foreign Purchases of Assets in the United States +308)  US Purchases of Foreign Assets Abroad −10 9)  Balance on Capital Account +5\begin{array}{lrrr}  	ext { 1)  US Goods Exports } &  +\$100\ 	ext {2)  US Goods Imports  } &-80\ 	ext {3)  US Service Exports  } &+40\ 	ext {4)  US Service Imports  } &-90\ 	ext { 5)  Net Investment Income } &+20\ 	ext { 6)  Net Transfers } &-15\ 	ext {7)  Foreign Purchases of Assets in the United States  } &+30\ 	ext {8)  US Purchases of Foreign Assets Abroad  } &-10\ 	ext { 9)  Balance on Capital Account } &+5\\end{array} 1)  US Goods Exports 2)  US Goods Imports 3)  US Service Exports 4)  US Service Imports  5)  Net Investment Income  6)  Net Transfers 7)  Foreign Purchases of Assets in the United States 8)  US Purchases of Foreign Assets Abroad  9)  Balance on Capital Account ​+$100−80+40−90+20−15+30−10+5​ 
 Refer to the given data.The United States' balance of capital and financial account is a:

Accepted Answer

A)   surplus of $5.
B)   deficit of $10.
C)   surplus of $25.
D)   deficit of $5. E) A) and B)
F) All of the above

Question 17

Answer the question on the basis of the following table,which indicates the dollar price of libras,the currency used in the hypothetical nation of Libra.Assume that a system of freely floating exchange rates is in place.  (1) Quantity of LibrasDemanded (Billions)  ‾100200300400(2) Dollar Priceof Libras‾$5432(3) Quantity of LibrasSupplied (Billions) ‾32520010075\begin{array}{c}\begin{array}{c}(1) \	ext {Quantity of Libras}\\underline{	ext {Demanded (Billions)  }}\ 100 \200 \300 \400 \end{array}\begin{array}{c}(2) \	ext {Dollar Price}\\underline{	ext {of Libras}}\\$ 5 \4\3\2\end{array}\begin{array}{c}(3) \	ext {Quantity of Libras}\\underline{	ext {Supplied (Billions) }}\325 \200 \100 \75\end{array}\end{array}(1) Quantity of LibrasDemanded (Billions)  ​100200300400​(2) Dollar Priceof Libras​$5432​(3) Quantity of LibrasSupplied (Billions) ​32520010075​​ 
 Refer to the table.The exchange rate is:

Accepted Answer

A)   4 libras for one dollar.
B)   0.25 libra for one dollar.
C)   0.40 libra for one dollar.
D)   3 libras for one dollar. E) A) and C)
F) A) and B)

Question 18

Evidence of a chronic balance of payments deficit is:

Accepted Answer

A)   a decline in amount of the nation's currency held by other nations.
B)   an excess of exports over imports.
C)   diminishing reserves of foreign currencies.
D)   an increase in the international value of the nation's currency.E) B) and D)
F) A) and B)

Question 19

In the U.S.balance of payments,U.S.purchases of assets abroad are a(n) :

Accepted Answer

A)   U.S.dollar outflow.
B)   U.S.dollar inflow.
C)   current account item.
D)   inpayment.E) B) and D)
F) A) and C)

Question 20

If a nation has a current account surplus and it does not have to make any inpayments or outpayments of official reserves,it must have a:

Accepted Answer

A)   surplus in its capital and financial account.
B)   balance of payments deficit.
C)   balance of payments surplus.
D)   deficit in its capital and financial account.E) A) and B)
F) All of the above

Exam 40: The Balance of Payments, Exchange Rates, and Trade Deficits

If the dollar price of yen rises,then:

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In a nation's balance of payments,which one of the following items is always recorded as a positive entry?

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If a nation has a current account surplus and it does not have to make any inpayments or outpayments of official reserves,it must have a:

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The following diagram is a flexible exchange market for foreign currency: Refer to the diagram.Other things equal,a rightward shift of the supply curve would:

Correct Answer
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The exchange rate system currently used by the industrially advanced nations is:

Correct Answer
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The large trade deficit that the United States has with China persists in part because:

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Evidence of a chronic balance of payments deficit is:

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Which of the following would call for outpayments from the United States?

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U.S.exports increase and U.S.imports decrease the supplies of foreign monies owned by U.S.banks.

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In the U.S.balance of payments,foreign purchases of assets in the United States are a:

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In the U.S.balance of payments,U.S.purchases of assets abroad are a(n) :

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Exam 40: The Balance of Payments, Exchange Rates, and Trade Deficits

If the dollar price of yen rises,then:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a nation's balance of payments,which one of the following items is always recorded as a positive entry?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a nation has a current account surplus and it does not have to make any inpayments or outpayments of official reserves,it must have a:

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The following diagram is a flexible exchange market for foreign currency: Refer to the diagram.Other things equal,a rightward shift of the supply curve would:

Correct AnswerverifiedShow Answer

The exchange rate system currently used by the industrially advanced nations is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The large trade deficit that the United States has with China persists in part because:

Correct AnswerverifiedShow Answer

Evidence of a chronic balance of payments deficit is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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Which of the following would call for outpayments from the United States?

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U.S.exports increase and U.S.imports decrease the supplies of foreign monies owned by U.S.banks.

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In the U.S.balance of payments,foreign purchases of assets in the United States are a:

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In the U.S.balance of payments,U.S.purchases of assets abroad are a(n) :

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