Deck 19: International Finance

Question 1

The record of international receipts and payments is called the

A) balance of payments.
B) current account.
C) official settlements account.
D) capital account.
E) U.S.official reserves.

Answer 1

A

Question 2

The capital account is the record of

A) a nation's international trading, borrowing, and lending.
B) payments for imports, receipts for exports, net interest, and net transfers.
C) foreign investment in the nation minus the nation's investment abroad.
D) changes in the government's holdings of foreign currency.
E) the nation's imports and exports of capital goods.

Answer 2

C

Question 3

Interest received from U.S.holdings of foreign assets and interest paid to foreigners for U.S.investment assets is recorded in the

A) capital account.
B) official settlements account.
C) official reserves account.
D) current account.
E) official dollar account.

Answer 3

D

Question 4

In 2008, the United States had

A) a current account surplus because imports were greater than exports.
B) a capital account deficit because exports were greater than imports.
C) a current account deficit because imports were greater than exports.
D) no change in U.S.official reserves.
E) a current account deficit and a capital account deficit.

Question 5

When a U.S.company makes a $200,000 donation to the International Red Cross to help the victims of an earthquake in India, the transaction is recorded in the

A) official settlements account.
B) current account.
C) international help account.
D) capital account.
E) one-way donations account.

Question 6

The current account is the record of

A) a nation's international trading, borrowing, and lending.
B) payments for imports, receipts for exports, net interest, and net transfers.
C) foreign investment in the nation minus the nation's investment abroad.
D) changes in the government's holdings of foreign currency.
E) the nation's exports but not its imports.

Question 7

The trade between countries is recorded in accounts called the balance of

A) international trade accounts.
B) export and import accounts.
C) payments accounts.
D) currency accounts.
E) U.S.official trade account.

Question 8

If the current account balance is negative, net interest is $100 billion and net transfer is -$100 billion, then

A) imports exceed exports.
B) exports exceed imports.
C) real GDP exceeds potential GDP.
D) the official settlements account must be positive.
E) the official settlements account must be negative.

Question 9

If the current account balance is -$100 billion, net interest = $0, net transfers = $0, then

A) exports are greater than imports.
B) imports are greater than exports.
C) the capital account balance must be +$100 billion.
D) there was an increase in net foreign assets.
E) the country is loaning abroad.

Question 10

Suppose you own some German government bonds that pay you interest every year.This interest is entered into which of the balance of payments accounts?

A) current account
B) capital account
C) official settlements account
D) trade account
E) interest account

Question 11

When a U.S.company purchases $1 million worth of French cheese, the value of that transaction is recorded in the

A) capital account.
B) investment account.
C) current account.
D) transfer account.
E) goods account.

Question 12

The balance of payments accounts record all of the following EXCEPT the country's

A) domestic investment.
B) international borrowing.
C) international trading.
D) international lending.
E) change in official reserves.

Question 13

The value of imports and exports is recorded in

A) international trade account.
B) official settlements account.
C) capital account.
D) current account.
E) official reserves account.

Question 14

The U.S.current account records

A) all the international transactions during the current year.
B) the current value of the balance of payments in U.S.dollars.
C) transactions involving trade, interest payments, and net transfers.
D) transactions involving foreign investment in the United States and U.S.investment abroad.
E) U.S.exports but not U.S.imports, which re recorded in the capital account.

Question 15

In 2008, the U.S.current account balance was -$706 billion, net interest was +$119 billion, net transfers were -$128 billion, and exports were +$1,827 billion.Therefore, imports were ________.

A) -$2,524 billion
B) +$2,524 billion
C) +$1,112 billion
D) -$1,112 billion
E) +$2,780 billion

Question 16

In the current account, the most largest category of international transactions is

A) net interest.
B) international investment.
C) net transfers.
D) imports.
E) statistical discrepancy.

Question 17

Foreign investment in the United States and U.S.investment abroad is recorded in the

A) investment account.
B) official settlements account.
C) capital account.
D) current account.
E) creditor/debtor account.

Question 18

The capital account records

A) all the purchases and sales of capital goods in the United States.
B) the current value of the balance of payments in U.S.dollars.
C) transactions involving trade, interest payments, and net transfers.
D) transactions involving foreign investment in the United States and U.S.investment abroad.
E) imports and exports of capital goods.

Question 19

If the United States imports goods and services for a total of $45 billion, exports goods and services for a total of $40 billion, records $4 billion as net interest and zero as net transfers, then the U.S.current account balance is

A) $89 billion.
B) $1 billion.
C) zero.
D) -$1 billion.
E) $81 billion.

Question 20

Which of the following is a balance of payments account?
I) current account
Ii) past account
Iii) capital account

A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii

Question 21

The official settlements account records the

A) change in official U.S.reserves.
B) revenue collected from taxing imports.
C) income used to settle international lawsuits.
D) change in the official U.S.exchange rate.
E) revenue collected from taxing exports.

Question 22

If official reserves increase, then we know that the

A) official settlements account balance is negative.
B) capital account is negative.
C) official settlements account balance is positive.
D) capital and current accounts must sum to zero.
E) capital account is positive.

Question 23

Suppose IBM purchases a factory in Japan.This purchase is entered into which of the balance of payments accounts?

A) current account
B) capital account
C) official settlements account
D) trade account
E) purchases account

Question 24

In the capital account, the most largest category of international transactions is

A) net interest.
B) foreign investment in the United States.
C) net transfers.
D) exports and imports.
E) statistical discrepancy.

Question 25

The government's holdings of foreign currency is recorded in the

A) money account.
B) official settlements account.
C) capital account.
D) current account.
E) currency account.

Question 26

The official settlements account is the record of

A) a nation's international trading, borrowing and lending.
B) payments for imports, receipts for exports, net interest, and net transfers.
C) foreign investment in the nation minus the nation's investment abroad.
D) changes in the government's holdings for foreign currency.
E) exports of capital goods minus imports of capital goods.

Question 27

When U.S.official reserves ________, the official settlements account balance becomes negative and when U.S.official reserves ________, the official settlements account balance becomes positive.

A) decrease; decrease
B) decrease; increase
C) increase; decrease
D) increase; increase
E) More information is needed about the balances on the current account and the capital account in order to answer this question.

Question 28

When the U.S.capital account shows a positive balance, that is an indication of

A) the value of all U.S.exports exceeding the value of all U.S.imports.
B) the United States acquiring more foreign reserves.
C) U.S.industries becoming more competitive.
D) foreigners investing more in the United States than the United States is investing abroad.
E) the value of U.S.exports of capital goods exceeding the value of U.S.imports of capital goods.

Question 29

The capital account balance is equal to

A) foreign investment in the United States minus U.S.investment abroad.
B) exports minus imports.
C) foreign assets owned by the United States minus U.S.assets owned by foreigners.
D) U.S.investment abroad minus foreign investment in the United States.
E) the value of exports of U.S.capital goods minus the value of imports of capital goods into the United States.

Question 30

Microsoft's purchase of a factory in Mexico is entered into the U.S.balance of payments accounts as a

A) negative entry in the capital account.
B) positive entry in the capital account.
C) negative entry in the current account.
D) positive entry in the current account.
E) negative entry in the settlements account.

Question 31

The official settlements account contains data on

A) officials' expenses.
B) official reserves.
C) trade complaints that are officially settled.
D) official governmental complaints between countries.
E) capital imports and exports.

Question 32

When a German company purchases a U.S.company for $20 million, in the balance of payments the value of that transaction is recorded in the

A) purchase account.
B) current account.
C) investment account.
D) capital account.
E) official purchases account.

Question 33

Suppose that the U.S.government acquires more foreign currency.How does this change affect the balance of payments accounts?

A) The official settlements account balance is positive.
B) The official settlements account balance is negative.
C) The capital account is positive.
D) The capital account is negative.
E) The balance of payments account sum to a positive number equal to the value of the additional foreign currency the government has obtained.

Question 34

Suppose Honda purchases a car factory in the United States.This purchase is entered into which of the balance of payments accounts?

A) current account
B) capital account
C) official settlements account
D) trade account
E) business purchases account

Question 35

U.S.official reserves are

A) equal to the value of the government's oil reserves.
B) the government's holding of foreign currency.
C) equal to the government's holding of gold.
D) equal to the value of U.S.government debt in the hands of foreigners.
E) equal to the balance on the capital account.

Question 36

If U.S.official reserves increase, the

A) current account increases.
B) balance of payments increases.
C) official settlements account balance is negative.
D) current account is positive.
E) official settlements account balance is positive.

Question 37

When the government increases the level of official reserves by $50 million, the change is recorded in the

A) official settlements account.
B) capital account.
C) foreign currency account.
D) official reserves account.
E) current account.

Question 38

In 2008, the current account balance was -$706 billion and the capital account balance was +$711 billion.Therefore, the official settlements account balance was ________ and the balance of all payments accounts summed was ________.

A) -$5 billion; zero
B) +$5 billion; zero
C) not enough information to determine; negative
D) negative; negative
E) positive; positive

Question 39

Suppose that the U.S.government acquires more foreign currency.This change is entered into which of the balance of payments accounts?

A) current account
B) capital account
C) official settlements account
D) trade account
E) reserves account

Question 40

If the foreign invest in the United States is ________ than the United States invests abroad, the capital account balance is ________.

A) greater than; positive
B) less than; positive
C) greater than; negative
D) less than; zero
E) greater than; zero

Question 41

There are three balance of payments accounts.The sum of the balances on these three accounts will equal

A) the total amount of the nation's foreign borrowing.
B) the total amount of the nation's foreign lending.
C) zero.
D) the total amount of the nation's exports.
E) the total amount of the nation's imports.

Question 42

In 2008, in the United States the sum of the balance of all three of the balance of payments accounts was

A) zero
B) slightly negative
C) greatly negative
D) slightly positive
E) greatly positive

Question 43

$$\begin{array} { l c } \text { Balance of payments accounts } & \text { (billions of dollars) } \\\hline \text { Syldavia investment abroad } & 170 \\\text { Exports of goods and services } & 140 \\\text { Net transfers } & 0 \\\text { Change in official reserves } & 0 \\\text { Net interest } & 0 \\\text { Imports of goods and services } & 180 \\\text { Foreign investment in Syldavia } & 210 \\\hline\end{array}$$

-The table above gives data for the nation of Syldavia.The current account has a

A) $40 billion deficit.
B) $30 billion deficit.
C) $40 billion surplus.
D) $50 billion deficit.
E) balance of $320 billion.

Question 44

$$\begin{array} { l c } \text { Variables } & \text { (billions of dollars) } \\\hline \text { Imports of goods and services } & 1,400 \\\text { Exports of goods and services } & 1,600 \\\text { Net interest } & 0 \\\text { Net transfers } & 0 \\\text { Foreign investment in the United } & \\\text { States } & 480 \\\text { U.S. investment abroad } & 700 \\\hline\end{array}$$
The table has some of the U.S.balance of payments account.

-The current account balance is equal to ________.

A) +$200 billion
B) -$200 billion
C) +$220 billion
D) -$220 billion
E) +$20 billion

Question 45

When the U.S.current account has a deficit, international payments from the United States ________ U.S.international receipts.To cover the current account deficit, there must be a ________ in the combined capital and official settlements accounts.

A) are less than; surplus
B) exceed; surplus
C) are less than; deficit
D) equal; surplus
E) exceed; deficit

Question 46

If the current account balance is -$100 billion, the capital account balance is $80 billion, then the official settlements account balance is

A) 0.
B) $180 billion.
C) $20 billion.
D) -$20 billion.
E) -$180 billion.

Question 47

If the current account balance has a $70 million deficit and there was no change in official reserves during that year, then we know that

A) the balance of payments must register a $70 million surplus.
B) the capital account balance must have a $70 million surplus.
C) the official settlements account balance must have a $70 million surplus.
D) net transfers were -$70 million.
E) the capital account balance must have a $70 million deficit.

Question 48

The sum of the current account plus the capital account plus the official settlements account equals

A) 100 percent.
B) U.S.official reserves.
C) zero.
D) government expenditures.
E) U.S.exports.

Question 49

$$\begin{array} { l c } \text { Balance of payments accounts } & \text { (billions of dollars) } \\\hline \text { Syldavia investment abroad } & 170 \\\text { Exports of goods and services } & 140 \\\text { Net transfers } & 0 \\\text { Change in official reserves } & 0 \\\text { Net interest } & 0 \\\text { Imports of goods and services } & 180 \\\text { Foreign investment in Syldavia } & 210 \\\hline\end{array}$$

-The table above gives data for the nation of Syldavia.The official settlements account has a

A) $40 billion deficit.
B) $30 billion deficit.
C) $40 billion surplus.
D) zero balance.
E) balance of $380 billion.

Question 50

$$\begin{array} { l c } \text { Variables } & \text { (billions of dollars) } \\\hline \text { Imports of goods and services } & 1,400 \\\text { Exports of goods and services } & 1,600 \\\text { Net interest } & 0 \\\text { Net transfers } & 0 \\\text { Foreign investment in the United } & \\\text { States } & 480 \\\text { U.S. investment abroad } & 700 \\\hline\end{array}$$
The table has some of the U.S.balance of payments account.

-If there is no statistical discrepancy, the capital account balance equals ________.

A) -$220 billion
B) +$220 billion
C) +$200 billion
D) -$200 billion
E) +$20 billion

Question 51

If the current account balance is -$450 billion, the capital account balance is $440 billion, then the official settlements balance is

A) $10 billion.
B) -$10 billion.
C) $890 billion.
D) -$890 billion.
E) $0 because it is always zero.

Question 52

$$\begin{array} { l c } \text { Balance of payments accounts } & \text { (billions of dollars) } \\\hline \text { Syldavia investment abroad } & 170 \\\text { Exports of goods and services } & 140 \\\text { Net transfers } & 0 \\\text { Change in official reserves } & 0 \\\text { Net interest } & 0 \\\text { Imports of goods and services } & 180 \\\text { Foreign investment in Syldavia } & 210 \\\hline\end{array}$$

-The table above gives data for the nation of Syldavia.The sum of the current account balance, capital account balance, and the official settlements account balances of Syldavia is equal to

A) $30 billion.
B) -$10 billion.
C) $10 billion.
D) zero.
E) $40 billion.

Question 53

The ________ always equals zero.

A) sum of current account plus capital account
B) sum of current account plus official settlements account
C) sum of capital account plus official settlements account
D) sum of current account plus capital account plus official settlements account
E) official settlements account

Question 54

We know that among the current account, the capital account, and the official settlements account that the

A) current account is always larger than the capital and official settlements accounts combined.
B) current and capital accounts sum to zero while the official settlements account must be greater than zero.
C) current account plus the capital account plus the official settlements account must sum to zero.
D) current account plus the capital account plus the official settlements account must sum to 100.
E) current account plus the capital account equals zero.

Question 55

In 2008, the current account balance was -706 billion and the capital account balance was +711 billion.Therefore, the official settlements account balance was ________ and the balance of all payments accounts was ________.

A) -5; zero
B) +5; zero
C) not enough information to determine; most likely negative
D) negative; negative
E) positive; positive

Question 56

$$\begin{array} { l c } \text { Variables } & \text { (billions of dollars) } \\\hline \text { Imports of goods and services } & 1,400 \\\text { Exports of goods and services } & 1,600 \\\text { Net interest } & 0 \\\text { Net transfers } & 0 \\\text { Foreign investment in the United } & \\\text { States } & 480 \\\text { U.S. investment abroad } & 700 \\\hline\end{array}$$
The table has some of the U.S.balance of payments account.

-If there is no statistical discrepancy, the official settlement account balance equals ________.

A) +$20 billion
B) -$20 billion
C) +$200 billion
D) +$220 billion
E) zero

Question 57

If the U.S.capital account balance has a $30 million surplus and there was no change in official reserves during that year, we know that

A) U.S.net foreign lending must equal $30 million.
B) the United States has a $30 million current account deficit.
C) the United States is a net lender.
D) U.S.official reserves have increased by $30 million.
E) the United States has a $30 million current account surplus.

Question 58

$$\begin{array} { l c } \text { Variables } & \text { (billions of dollars) } \\\hline \text { Imports of goods and services } & 1,400 \\\text { Exports of goods and services } & 1,600 \\\text { Net interest } & 0 \\\text { Net transfers } & 0 \\\text { Foreign investment in the United } & \\\text { States } & 480 \\\text { U.S. investment abroad } & 700 \\\hline\end{array}$$
The table has some of the U.S.balance of payments account.

-If there is no statistical discrepancy, the sum of all three balance of payments accounts equals ________.

A) zero
B) -$20 billion
C) +$200 billion
D) +$220 billion
E) +$20 billion

Question 59

$$\begin{array} { l c } \text { Balance of payments accounts } & \text { (billions of dollars) } \\\hline \text { Syldavia investment abroad } & 170 \\\text { Exports of goods and services } & 140 \\\text { Net transfers } & 0 \\\text { Change in official reserves } & 0 \\\text { Net interest } & 0 \\\text { Imports of goods and services } & 180 \\\text { Foreign investment in Syldavia } & 210 \\\hline\end{array}$$

-The table above gives data for the nation of Syldavia.The capital account has a

A) $40 billion deficit.
B) $30 billion deficit.
C) $40 billion surplus.
D) $50 billion deficit.
E) balance of $380 billion.

Question 60

The sum of the balances of the three accounts of the balance of payments (the current account, the capital account, and the official settlements account) is

A) negative if there is a balance of trade deficit.
B) equal to zero.
C) positive if there is a balance of trade surplus.
D) negative if there is a balance of trade surplus or positive if there is a balance of trade deficit.
E) positive if there is a balance of trade surplus or negative if there is a balance of trade deficit.

Question 61

Because of the large current account deficits accumulated by the United States since 1981, the United States has become a

A) creditor nation.
B) broke nation.
C) balanced nation.
D) debtor nation.
E) nation with no official reserves.

Question 62

The United States currently is

A) a net borrower and has been since the end of World War II in 1945.
B) a net lender and has been since the 1980s.
C) a net borrower and has been since the 1980s.
D) a net lender and has been since the end of World War II in 1945.
E) neither a net lender nor a net borrower.

Question 63

A nation that has invested more in the rest of the world than other countries have invested in it is called a

A) debtor nation.
B) creditor nation.
C) net borrower.
D) net lender.
E) saver nation.

Question 64

A country with an official settlements balance of zero and a negative current account balance is a

A) net borrower.
B) net lender.
C) net saver.
D) net creditor.
E) None of the above answers is correct because it is not possible to have an official settlements balance of zero and a negative current account balance.

Question 65

Which of the following has not changed much as a percent of GDP over the last twenty years for the United States?
I) the official settlements account
Ii) the capital account
Iii) the current account

A) i only
B) ii only
C) iii only
D) ii and iii
E) None of the above answers are correct because all three have had large swings over the last 20 years.

Question 66

A nation that currently has a surplus in its current account is called a

A) debtor nation.
B) creditor nation.
C) net borrower.
D) net lender.
E) capital account surplus nation.

Question 67

Which of the following is true?

A) Most countries are net lenders.
B) Most countries are net borrowers.
C) A net borrower must be a debtor country.
D) A net lender must be a debtor nation.
E) A net lender must be a creditor nation.

Question 68

Between 1981 and 2008, the United States

A) had a current account deficit almost every year.
B) had a current account surplus almost every year.
C) some years had a deficit and some years had a surplus that netted out to $0.
D) some years had a deficit and some years had a surplus that totaled a surplus of $2.5 trillion.
E) had a current account surplus or deficit that almost equal to $0 every year.

Question 69

A country reports exports minus imports of $300 billion, net interest income of $30 billion, net transfers of $50 billion, and no change in official reserves.The country is a

A) net borrower.
B) net lender.
C) debtor nation.
D) net liability.
E) net asset.

Question 70

Looking at the U.S.balance of payments from 1980 to 2008, we see that the

A) current account was positive until 1992 then turned negative.
B) current account has been negative for most years and was small in the late 1980s and early 1990s.
C) capital account has been negative for most years and was small in the late 1980s and early 1990s.
D) official settlements account was large in the 1980s relative to the current account.
E) current account was negative until 1992 then turned positive.

Question 71

$$\begin{array} { l r } \text { Variables } & \text { (billions of dollars) } \\\hline \text { Imports of goods and services } & 1,000 \\\text { Exports of goods and services } & 900 \\\text { Net interest } & - 100 \\\text { Net transfers } & 0 \\\text { Foreign investment in the United States } & 1,190 \\\text { U.S. investment abroad } & 1,000 \\\text { Decrease in U.S. official reserves } & 10\end{array}$$
The table above gives data on the U.S.balance of payments in 2015.

-The current account balance is

A) -$100 billion.
B) $100 billion.
C) -$200 billion.
D) $200 billion.
E) $1,900 billion.

Question 72

A nation that is a net borrower each year over time will become a ________ nation. A nation that is a net lender each year over time will become a ________ nation. Since the early 1980s, the United States has been a ________ due to the current account ________.

A) debtor; creditor; net lender; surpluses
B) creditor; debtor; net lender; surpluses
C) creditor; debtor; net borrower; deficits
D) debtor; creditor; net borrower; deficits
E) creditor; debtor; net lender; deficits

Question 73

The United States currently is a

A) creditor nation and has been since the end of World War II in 1945.
B) debtor nation and has been since 1989.
C) creditor nation and has been one since 1989.
D) debtor nation and has been since the end of World War II in 1945.
E) neither a debtor nation nor a creditor nation.

Question 74

From the 1990s to the present, the U.S.current account balance has had a ________ and the U.S.capital account balance has had ________.

A) deficit; a deficit
B) deficit; a surplus
C) surplus; a deficit
D) surplus; a surplus
E) deficit; neither a deficit nor a surplus

Question 75

For most of the years since 1981, the United States has had

A) a current account deficit.
B) a capital account deficit.
C) balanced trade.
D) a large official settlements balance.
E) an official settlements account deficit.

Question 76

During the last year, foreign investment in a country was $500 billion and the country's investment abroad was $600 billion.Which of the following statements is true?

A) The country has net borrowing of $100 billion.
B) The country has a current account deficit of $100 billion.
C) The country has a current account deficit of $1,100 billion.
D) The country has net lending of $100 billion.
E) The country has a capital account deficit of $1,100 billion.

Question 77

A nation that currently has a surplus in its capital account is called a

A) debtor nation.
B) creditor nation.
C) net borrower.
D) net lender.
E) current account surplus nation.

Question 78

From the early 1990s through 2008, the U.S.

A) balance of payments exceeded the capital account.
B) current account was negative.
C) capital account was negative.
D) actual balance of payments deficit exceeded what the United States measured as the balance of payments deficit.
E) current account and U.S.capital account were both positive.

Question 79

If U.S.exports exceed U.S.imports and official reserves do not change, the United States

A) borrows from the rest of the world.
B) makes loans to the rest of the world.
C) borrows from the U.S.government.
D) makes loans to the U.S.government.
E) cannot sell any capital to foreigners.

Question 80

The United States switched from being a ________ to being a ________ in the early 1980s, when it started to run large current account ________.

A) net lender; net borrower; surpluses
B) net borrower; net lender; surpluses
C) net lender; net borrower; deficits
D) net borrower; net lender; deficits
E) debtor nation; creditor nation; deficits