Chapter2PaymentsamongNations

1、 Chapter 16: Payments among Nations Multiple Choice Questions 1. A country?s balance of payments records: a. The value of all exports of goods and services from that country for a period of time. b. All flows of value between that country?s residents and residestof the rest of the world during a per

2、iod of time. c. All flows of financial assets that cross that country?s borders during a period of time. d. All flows of goods into that country during a period of time. ANSWER: B 2. A credit item in the balance of payments is: a. An item for which the country must be paid. b. An item for which the

3、country must pay. c. Any imported item. d. An item that creates a monetary claim owed to a foreigner. ANSWER: A 3. Every international exchange of value is entered into the balance-of-payments accounts time(s). a. 1 b. 2 c. 3 d. 4 ANSWER: B 4. A debit item in the balance of payments is: a. An item f

4、or which the country must be paid. b. An item for which the country must pay. c. Any exported item. d. An item that creates a monetary claim on a foreigner. ANSWER: B 5. In a nations balance of payments, which one of the following items is always recorded as a positive entry? a. Changes in foreign c

5、urrency reserves. b. Imports of goods and services. c. Military foreign aid supplied to allied nations. d. Purchases by foreign travelers visiting the country. ANSWER: D 6. The sum of all of the debit items in the balance of payments: a. Equals the overall balance. b. Equals the sum of all credit it

6、ems. c. Equals compensating? transactions. d. Equals the sum of credit items minus errors and omissions. ANSWER: B 7. Which of the following capital transactions are entered as debits in the U.S. balance of payments? a. A U.S. resident transfers $100 from his account at Credit Suisse in Basel (Switz

7、erland) to his account at a San Francisco branch ofWells Fargo Bank. b. A French resident transfers $100 from his account at Wells Fargo Bank in San Francisco to his Credit Suisse account in Basel. c. A U.S. resident sells his IBM stock to a French resident. d. A U.S. resident sells his Credit Suiss

8、e stock to a French resident. ANSWER: B 8. An increase in a nations financial liabilities to foreign residents is a: a. Reserve inflow. b. Reserve outflow. c. Capital inflow. d. Capital outflow. ANSWER: C 9. are money-like assets that are held by governments and that are recognized by governments as

9、 fully acceptable for payments between them. a. Official international reserve assets b. Unofficial international reserve assets c. Official domestic reserve assets d. Unofficial domestic reserve assets ANSWER: A 10. Which of the following is considered a capital inflow? a. A sale of U.S. financial

10、assets to a foreign buyer. b. A loan from a U.S. bank to a foreign borrower. c. A purchase offoreign financial assets by a U.S. buyer. d. A U.S. citizen?s repayment of a loan from a foreign bank. ANSWER: A 11. Ina county?s balance of payments, which of the following transactions ardebits? a. Domesti

11、c bank balances owned by foreigners are decreased. b. Foreign bank balances owned by domestic residents are decreased. c. Assets owned by domestic residents are sold to nonresidents. d. Securities are sold by domestic residents to nonresidents. ANSWER: A 12. The role of is to direct one nation?s sav

12、ings into another nation?s investments: a. Merchandise trade flows b. Services flows c. Current account flows d. Capital flows ANSWER: D 13. The net value of flows of goods, services, income, and unilateral transfers is called the: a. Capital account. b. Current account. c. Trade balance. d. Officia

13、l reserve balance. ANSWER: B 14. The net value of flows of financial assets and similar claims (excluding official international reserve asset flows) is called the: a. Financial account. b. Current account. c. Trade balance. d. Official reserve balance. ANSWER: A 15. The financial account in the U.S

14、. balance of payments includes: a. Everything in the current account. b. U.S. government payments to other countries for the use of military bases. c. Profits that Nissan of America sends back to Japan. d. New U.S. investments in foreign countries. ANSWER: B 16. A U.S. resident increasing her holdin

15、gs of a foreign financial asset causes a: a. Credit in the U.S. current account. b. Debit in the U.S. current account. c. Credit in the U.S. capital account. d. Debit in the U.S. capital account. ANSWER: D 17. A foreign resident increasing her holdings of a U.S. financial asset causes a: a. Credit i

16、n the U.S. current account. b. Debit in the U.S. current account. c. Credit in the U.S. capital account. d. Debit in the U.S. capital account. ANSWER: A 18. A deficit in the current account: a. Tends to cause a surplus in the financial account. b. Tends to cause a deficit in the financial account. c

17、. Has no relationship to the financial account. d. Is the result of increasing exports and decreasing imports. ANSWER: A 19. In September, 2005, exports of goods from the U.S. decreased $3.3 billion to $73.4 billion, and imports of goods increased $3.8 billion to $144.5 billion. This increased the d

18、eficit in: a. The balance of payments. b. The financial account. c. The current account. d. Unilateral transfers. ANSWER: C 20. Which of the following would contribute to a U.S. current account surplus出疑问 a. The United States makes a unilateral tariff reduction on imported goods. b. The United State

19、s cuts back on American military personnel stationed in Japan. c. U.S. tourists travel in large numbers to Asia. d. Russian vodka becomes increasingly popular in the United States. ANSWER: D 21. Which of the following transactions is recorded in the financial account? a. Ford motor company builds a

20、new plant in China b. A Chinese businessman imports Ford automobiles from the United States. c. A U.S. tourist spends money on a trip to China. d. The New York Yankees are paid $10 million by the Chinese to play an exhibition game in Beijing, China. ANSWER: A 22. If a British business buys U.S. gove

21、rnment securities, how will this be entered in the balance of payments? a. It will appear in the trade account as an import. b. It will appear in the trade account as an export. c. It will appear in the financial account as an increase in U.S. assets held by foreigners. d. It will appear in the fina

22、ncial account as a decrease in U.S. assets held by foreigners. ANSWER: D 23. In the balance of payments, the statistical discrepancy or error term is used to: a. Ensure that the sum of all debits matches the sum of all credits. b. Ensure that imports equal the value of exports. c. Obtain an accurate

23、 account of a balance-of-payments deficit. d. Obtain an accurate account of a balance-of-payments surplus. ANSWER: A 24. Official reserve assets are: a. The gold holdings in the nation?s central bank. b. Money like assets that are held by governments and that are recognized by governments as fully a

24、cceptable for payments between them. c. Government T-bills and T-bonds. d. Government holdings of SDR?s ANSWER: B 25. Which of the following constitutes the largest component of the world?s international reserve assets? a. Gold. b. Special Drawing Rights. c. IMF Reserve Positions. d. Foreign Currenc

25、ies. ANSWER: D 26. The net accumulation of foreign assets minus foreign liabilities is: a. Net official reserves. b. Net domestic investment. c. Net foreign investment. d. Net foreign deficit. ANSWER: C 27. A country experiencing a current account surplus: a. Needs to borrow internationally. b. Is a

26、ble to lend internationally. c. Must also have had a surplus in its overall balance. d. Spent more than it earned on its merchandise and service trade, international income payments and receipts and international transfers. ANSWER: B 28. The measures the sum of the current account balance plus the p

27、rivate capital account balance. a. Official capital balance b. Unofficial capital balance c. Official settlements balance d. Unofficial settlements balance ANSWER: C 29. If the overall balance is in, there is an accumulation of official reserve assets by the country or a decrease in foreign official

28、 reserve holdings of the countrys assets. a. Surplus b. Deficit c. Balance d. Foreign hands ANSWER: A 30. Which of the following is the current account balance NOT equal to? a. The difference between domestic product and domestic expenditure. b. The difference between national saving and domestic in

29、vestment. c. Net foreign investment. d. The difference between government saving and government investment. ANSWER: D 31. A nation is a(n)if its current account is in deficit. a. Importer b. Exporter c. Borrower d. Lender ANSWER: C 32. A country has a current account if it is saving more than it is

30、investing domestically. a. Surplus b. Deficit c. Balance d. Equilibrium ANSWER: A 33. A deficit in the overall balance generally is an indication that: a. The country?s monetary authorities were selling foreign currency. b. The country?s monetary authorities were buying foreign currency. c. The coun

31、try?s monetary authorities were buying domestic currency. d. The country?s monetary authorities were buying imported goods. ANSWER: B 34. A statement of the stocks of a nations international assets and foreign liabilities at a point in time is the countrys investment position. a. Public b. Private c

32、. Domestic d. International ANSWER: D 35. Within the 20th century and into the 21st, the U.S. net International Investment position has: a. Been consistently positive. b. Been consistently negative. c. Gone from negative to positive and back to negative. d. Gone from positive to negative and back to

33、 positive. ANSWER: D 36. A nation is called a lender if: a. Its financial account is in deficit during a time period. b. Its current account is in surplus during a time period. c. Its current account is in deficit during a time period. d. Its net stock of foreign assets is positive. ANSWER: B 37. A

34、nation is called a creditor if: a. It provided financial assets to other countries. b. Its net stock of foreign assets is positive. c. Its current account is in surplus during a time period. d. Its current account is in deficit during a time period. ANSWER: B 38. The international investment positio

35、n of a country shows: a. Its stocks of international assets during a time period. b. Its stocks of international liabilities during a time period. c. Its stocks of international assets and liabilities at a moment in time. d. Whether its current account is in deficit or surplus at a moment in time. A

36、NSWER: C 39. The current account balance (CA): a. Equals the sum of national savings and domestic capital formation. b. Equals net foreign investment. c. Equals the domestic production of goods and services. d. All of the above. ANSWER: B 40. If a country has a current account deficit, that means th

37、at: a. It is acting as a net lender to the rest of the world. b. Its foreign assets are growing slower than its foreign liabilities. c. Its foreign assets are growing faster than its foreign liabilities. d. Its exports are higher than its imports. ANSWER: B True/False Questions 41. Capital inflows a

38、re debits and capital outflows are credits. ANSWER: FALSE 42. The net value of the flow of goods, services, income, and gifts is the current account balance. ANSWER: TRUE 43. The net flow of financial assets and similar claims is the private current account balance. ANSWER: FALSE 44. The majority of

39、 countries official reserves assets are now foreign exchange assets, financial assets denominated in a foreign currency that is readily acceptable in international transactions. ANSWER: TRUE 45. A countrys financial account balance equals the countrys net foreign investment. ANSWER: FALSE 46. A coun

40、try has a current account deficit if it is saving more than it is investing domestically. ANSWER: FALSE 47. The official settlements balance measures the sum of the capital account balance plus the public current account balance. ANSWER: FALSE 48. A nations international investment position shows it

41、s stock of international assets and liabilities at a moment in time. ANSWER: TRUE 49. A nation is a borrower if its current account is in deficit during a time period. ANSWER: TRUE 50. A nation is a debtor if its net stock of foreign assets is positive. ANSWER: FALSE 51. A transaction leading to a f

42、oreign resident increasing her holdings of a U.S. financial asset will be recorded as a debit on the U.S. financial account. ANSWER: FALSE 52. A credit item is an item for which a country must pay. ANSWER: FALSE 53. Gold is a major reserve asset that is currently often used in official reserve trans

43、actions. ANSWER: FALSE 54. The current account balance is equal to the difference between domestic product and national expenditure. ANSWER: TRUE 55. In 2007 U.S. households, businesses and government were buying more goods and services than they were producing. ANSWER: TRUE Essay Questions 56. Whic

44、h of the following transactions could contribute to a British current account surplus? Explain why. a. A French firm sells defense equipment to the British government for 250 million pounds in bank deposits b. Great Britain makes a gift of $500 million to the Iraqi government in the form of equipmen

45、t to aid in reconstruction. POSSIBLE RESPONSE: The first transaction will lead to a debit entry in the current account, and this will not contribute to a British current account surplus (rather to a deficit). The second transaction will enter the financial account of Great Britain as a debit item. T

46、he export of the British equipment to Iraq thus will be recorded as a credit item on the current account of Great Britain. This will contribute to a British current account surplus. 57. You are provided with the following information about a countrys international transactions during a given year: S

47、ervice exports $346 Service imports $354 Merchandise exports $480 Merchandise imports $348 Income flows, net $153 Unilateral transfers, net $142 Increase in the country! holding of foreign assets, net (excluding official reserves assets) $352 Increase in foreign holdings of the country! assets, net

48、(excluding official reserve assets) $252 Statistical discrepancy, net $154 Calculate the official settlements balance and the current account balance. Is the country increasing or decreasing its net holdings of official reserve assets? Why? POSSIBLE RESPONSE: Current account balance: $346- 354 + 480

49、 - 348 + 153 - 142 = $135 Official settlements balance: $346- 354 + 480 - 348 +153 -142 + 252 352 + 154 = $189 Change in official reserve assets (net) = official settlements balance = 一 $189. The country is increasing its net holdings of official reserve assets. 58. Every international transaction i

50、s recorded in the balance of payments as both a credit and a debit. In the case of U.S. foreign aid, a debit in the balance of payments, what is the offsetting credit? Explain. POSSIBLE RESPONSE: Usually the foreign aid is in the form of goods and/or services delivered to the country. The foreign ai

51、d might be agricultural products, equipment, sending personnel, etc. The offsetting credit item is usually termed as an export item (exports of goods and services). 59. When countries have severe balance of payments difficulties caused by unsustainable current account deficits, they can approach the

52、 International Monetary Fund (IMF) for assistance. In providing financial assistance, the IMF generally insists that the country implement a series of policy changes designed to reduce the deficit. These programs are controversial and are called austerity programs as they tend to focus on demand red

53、uction. Explain why demand reduction would solve a current account deficit problem. Would a program designed to increase the nation?s growth rate be a method of reducing a current account deficit? Why or why not? POSSIBLE RESPONSE: One of the views of the current account is that it is the difference

54、 between domestic product and national expenditure. Demand reduction is believed to be able to reduce the national expenditures and thus lower the current account deficit (or create a surplus). This should be the direct effect of demand reduction. In the long run the demand reduction might adversely

55、 impact a nation?sgrowth rate. Lower domestic product leads to higher current account deficit. A program which is able to increase the nation?s growth rate would lead to a reduction in the current account deficit because, as already mentioned, the current account equals domestic production minus nat

56、ional expenditure. 60. We often hear that trade deficits are bad for a country. Do you agree or disagree with this viewpoint? Explain carefully. POSSIBLE RESPONSE: Having a deficit on the goods and services balance (also called trade balance) means that a country imported more goods and services tha

57、n it exported. A trade deficit might be considered bad for a country because it indicates that the country consumes more foreign goods than the country exports. This might be an indicator that the economy is not able to produce the goods and services that its citizens consume. It has to be mentioned however that the goods and services balance is only part of the current account balance. It might the case that a country is running a trade deficit but has a balanced current account. The current account also contains international income flows (income received from foreigners