Deck 18: International Macroeconomics

Question 1

Use the following to answer questions:
(Table: International Transactions)Refer to Table: International Transactions.The balance on current account is:

A) $29000.
B) $22000.
C) -$8000.
D) -$29000.

Answer 1

-$29000.

Question 2

Use the following to answer questions:
If the balance of payments on financial account is $25,the balance of payments on goods and services is -$20,and the statistical discrepancy in the financial account is $2,then the sum of net international transfer payments and net international factor income is:

A) -$7.
B) -$5.
C) $7.
D) $47.

Answer 2

-$7.

Question 3

Which of the following would be included in the Canadian current account?

A) public purchases and sales of financial assets
B) trade balance
C) financial account balance
D) private purchases and sales of financial assets

Answer 3

trade balance

Question 4

When a Japanese investor buys stock in General Motors,the _____ account is affected.

A) current
B) financial
C) reserve
D) foreign exchange

Question 5

Assume that Tom sells a crate of Ontario peaches to a retailer in the United States and Susan sells a Canadian bond to a customer in Britain.Which statement illustrates the difference and/or similarity between these two transactions?

A) Only Tom will actually receive Canadian dollars as a result of this transaction.
B) The sale of the bond generates a liability,while the sale of the peaches does not.
C) Both sales generate an asset for Canada.
D) Both sales generate a liability for Canada.

Question 6

When Canada gives foreign aid to developing nations in Africa,the _____ account is affected.

A) current
B) financial
C) reserve
D) foreign exchange

Question 7

Use the following to answer questions:
(Table: International Transactions)Refer to Table: International Transactions.The merchandise trade balance is:

A) $51000.
B) $48000.
C) $46000.
D) $2000.

Question 8

When the dollar value of the Swiss franc was very high following the financial crisis in 2008:

A) Swiss exports were more expensive in Canada.
B) Swiss exports were less expensive in Canada.
C) the Swiss National Bank sold Swiss francs to increase its value.
D) the Swiss National Bank bought francs to decrease its value.

Question 9

Economists summarize a country's transactions with other countries with a(n)_____ account.

A) circular flow
B) balance of payments
C) exchange rate
D) purchasing power parity

Question 10

Which asset would be included in the Canadian financial account?

A) a computer made in Canada and exported to Britain
B) a computer made in Britain and imported into Canada
C) interest on a Canadian bond sold to someone living overseas
D) the value of a bond from a Canadian company sold to someone living in Britain

Question 11

International macroeconomics deals with:

A) reducing regulations on business.
B) the relationships between economies of different nations.
C) reducing employment discrimination.
D) providing financial information to investors.

Question 12

Which asset would NOT be included in the Canadian financial account?

A) a Japanese factory purchased by a Canadian company
B) Canadian stock sold to someone in Japan
C) a Japanese bond sold to someone in Canada
D) a Chinese video game imported into Canada

Question 13

If a country has a current account deficit,it must have a:

A) financial account surplus.
B) balance of payment surplus.
C) financial account deficit.
D) balance of payments deficit.

Question 14

Use the following to answer questions:
(Table: International Transactions)

A) $51000.
B) $48000.
C) $3000.
D) -$29000.

Question 15

Use the following to answer questions:
(Table: International Transactions)Refer to Table: International Transactions.What additional capital inflows are needed to equilibrate the balance of payments?

A) -$29000
B) $20000
C) $29000
D) $80000

Question 16

If Canada exports $100 billion of goods and services and imports $150 billion of goods and services and there is no other factor income or transfers,the balance on the current account is:

A) $250 billion.
B) -$250 billion.
C) $50 billion.
D) -$50 billion.

Question 17

Which asset would be included in the Canadian current account?

A) a factory in Japan purchased by a firm in Canada
B) stock in a Canadian company sold to someone in Japan
C) a dividend on stock in a Canadian company paid to someone in Japan
D) a bond issued by a firm in Japan sold to someone in Canada

Question 18

If Canada exports $100 billion of goods and services and imports $150 billion of goods and services and there is no other factor income or transfers,the balance on the financial account is:

A) $250 billion.
B) -$250 billion.
C) $50 billion.
D) -$50 billion.

Question 19

If Canada imports more goods from Japan than it exports to Japan,how will the difference be financed?

A) Canadian consumers will borrow money from domestic banks.
B) Canada will buy more Japanese assets.
C) Canada will sell assets,generating a liability that obligates Canadians to pay for those imports in the future.
D) Canada will sell assets to the Japanese,which would reduce its liabilities.

Question 20

The difference between a country's exports and imports of goods alone (not including services)is the:

A) merchandise trade balance.
B) balance of payments on good and services.
C) balance of payments on current account.
D) current account.

Question 21

Money flows into Canada from other countries as a result of:

A) Canadian purchases of foreign goods and services.
B) payments to foreign owners of Canadian assets.
C) domestic purchases of Canadian goods and services.
D) transfer payments from foreign sources to Canadian residents.

Question 22

A current account surplus is generally a result of:

A) imports exceeding exports.
B) sales of stock in Canadian companies to citizens of foreign countries.
C) a large influx of foreign investment income.
D) exports exceeding imports.

Question 23

If a country has a positive balance of payments on the current account,then it must:

A) be exporting too much.
B) be importing too much.
C) have a surplus on the financial account.
D) have a deficit on the financial account.

Question 24

A statement of spending that flows into and out of the country for purchases of assets during a particular period is the nation's:

A) current account.
B) financial account.
C) universal exchange position.
D) statistical discrepancy.

Question 25

A Peruvian financial investor purchases a sporting goods store in Calgary.In the accounting for Canadian international transactions,this transaction would appear in the _____,and it would be entered as a payment _____ foreigners.

A) current account;from
B) current account;to
C) financial account;from
D) financial account;to

Question 26

When there is a deficit in the Canadian balance of payments on the current account,we pay for the difference by:

A) allowing the price of currency to rise.
B) allowing the price of currency to fall.
C) buying assets from other countries.
D) selling assets to other countries.

Question 27

If the merchandise trade balance is -$15,net international transfer payments and net international factor income are $4,the balance of payments on goods and services is -$25,and the balance of payments on the financial account is $18,then the statistical discrepancy in the financial account is:

A) $15.
B) $3.
C) -$3.
D) -$1.

Question 28

The balance between spending flowing into a country from other countries and spending flowing out of that country to other countries is the:

A) singular account.
B) euro-dollar account.
C) universal exchange account.
D) balance of payments.

Question 29

A financial investor from Vancouver purchases bonds issued by the government of Peru.In the accounting for Canadian international transactions,this transaction would appear in the _____,and it would be entered as a payment _____ foreigners.

A) current account;from
B) current account;to
C) financial account;from
D) financial account;to

Question 30

A family from Peru eats in a restaurant in Montreal.In the accounting for Canadian international transactions,this transaction would appear in the _____,and it would be entered as a payment _____ foreigners.

A) current account;from
B) current account;to
C) financial account;from
D) financial account;to

Question 31

A deficit in the current account means there will be:

A) a surplus in the financial account.
B) a deficit in the financial account.
C) a balanced financial account.
D) either a surplus or a deficit in the financial account.

Question 32

A current account deficit exists when:

A) the balance on the current account is negative.
B) spending flowing out of the country is less than spending flowing into the country.
C) net exports are positive.
D) an economy buys less from foreigners than it sells to them.

Question 33

A country has a financial account deficit if the balance on the:

A) financial account is negative.
B) financial account is positive.
C) current account is zero.
D) current account is positive.

Question 34

A country has a financial account surplus if the balance on the:

A) financial account is negative.
B) financial account is positive.
C) current account is zero.
D) current account is positive.

Question 35

A family from Toronto eats in a restaurant in Mexico City.In the accounting for Canadian international transactions,this transaction would appear in the _____,and it would be entered as a payment _____ foreigners.

A) current account;to
B) current account;from
C) financial account;to
D) financial account;from

Question 36

A current account deficit is generally a result of:

A) imports exceeding exports.
B) Canadian purchases of bonds issued by foreign corporations.
C) a large amount of Canadian purchases of foreign real estate.
D) exports exceeding imports.

Question 37

In 2016,the $481 billion deficit on the Canadian current account was offset by a surplus of $406 billion on financial account.This difference is the result of a:

A) budget deficit.
B) statistical discrepancy.
C) trade deficit.
D) national debt.

Question 38

A _____ balance on the financial account means a _____.

A) positive;financial account surplus
B) negative;financial account surplus
C) positive;financial account deficit
D) positive;current account surplus

Question 39

A current account surplus occurs when:

A) the balance on the current account is positive.
B) net exports are negative.
C) spending flowing out of the country exceeds spending flowing into the country.
D) imports exceed exports.

Question 40

Money flows into Canada from other countries as a direct result of:

A) foreign purchases of Canadian goods and services.
B) Canadian purchases of foreign goods and services.
C) Canadian investment in foreign companies.
D) Canadian purchases of foreign assets.

Question 41

The relationship between a country's balance of payments on current account (CA)and its balance of payments on financial account (FA)is NOT described by:

A) CA + FA = 0.
B) CA = FA.
C) CA = - FA.
D) FA = - CA.

Question 42

After a hurricane devastates New Orleans,a Canadian charity sends $1 million to the United States to help the survivors rebuild their homes.In the U.S.balance of payments,this transaction causes the balance on the _____ account to _____.

A) current;decrease
B) current;increase
C) financial;decrease
D) financial;increase

Question 43

Use the following to answer questions:
(Table: Balance of Payment)Refer to Table: Balance of Payments.The country's balance of payments on financial account is:

A) $0.
B) $375 billion.
C) $355 billion.
D) -$355 billion.

Question 44

The difference between a country's balance of payments on goods and services and the merchandise trade balance is that:

A) the merchandise trade balance does not include exports and imports of services.
B) the balance of payments does not include exports and imports of services.
C) the merchandise trade balance does not include imports of goods and services.
D) the balance of payments does not include imports of goods and services.

Question 45

A Japanese banker buys some newly issued Canadian Treasury bonds.In the Canadian balance of payments account,this transaction is entered as a payment _____ foreigners in the _____ account.

A) from;current
B) to;current
C) to;financial
D) from;financial

Question 46

Economists usually use GDP rather than GNP because they are tracking:

A) only transactions on the current account.
B) only transactions on the financial account.
C) production rather than income.
D) income rather than production.

Question 47

A Canadian firm buys a new Volvo,built in Sweden.In the Canadian balance of payments,this transaction causes the balance on the _____ account to _____.

A) current;decrease
B) current;increase
C) financial;decrease
D) financial;increase

Question 48

Use the following to answer questions:
If a country runs a deficit on its balance of payments for goods and services,to pay for its imports,it must:

A) raise taxes.
B) print new money.
C) sell assets to foreigners.
D) decrease its exports.

Question 49

A Canadian deposits $10 000 in an account in a London bank.In the Canadian balance of payments,this transaction causes the balance on the _____ account to _____.

A) financial;increase
B) financial;decrease
C) current;decrease
D) current;increase

Question 50

The difference between GDP and GNP is that:

A) GNP includes international factor income.
B) GDP includes nternational factor income.
C) GNP includes the money supply.
D) GDP includes the money supply.

Question 51

Use the following to answer questions:
Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk.
(Scenario: Japan and Canada)Refer to Scenario: Japan and Canada.Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk.Assuming that loans in Japan and Canada carry equal risk,this implies that:

A) Canadian lenders will lend to Japanese borrowers.
B) Japanese lenders will lend to Canadian borrowers.
C) the interest rate in Japan will increase further as compared to the Canadian interest rate.
D) the central bank of Japan has adopted a more expansionary monetary policy.

Question 52

A Brazilian bank buys shares of stock in Bombardier,a Canadian high-tech company.In the Canadian balance of payments,this transaction causes the balance on the _____ account to _____.

A) current;decrease
B) current;increase
C) financial;decrease
D) financial;increase

Question 53

A country's balance of payments on financial account is the:

A) difference between the dollar value of a country's exports and its imports of goods and services.
B) difference between the dollar value of a country's exports and its imports of goods only.
C) difference between the country's sale of assets to foreigners and its purchases of assets from foreigners.
D) same value as the country's merchandise trade balance.

Question 54

Canadian retailers import toys from China.In the Canadian balance of payments account,this transaction is entered as a payment _____ foreigners in the _____ account.

A) to;financial
B) from;financial
C) to;current
D) from;current

Question 55

Suppose that the equilibrium interest rate in the Canadian market for loanable funds is 3% prior to any international capital flows in Canada.The equilibrium interest rate in the Japanese market for loanable funds is 7%.If lenders in both nations believe that loans to foreigners are just as good as loans to their own citizens,capital will flow from _____,making interest rates _____ in Japan and _____ in Canada.

A) Canada to Japan;rise;fall
B) Japan to Canada;fall;rise
C) Japan to Canada;rise;fall
D) Canada to Japan;fall;rise

Question 56

Use the following to answer questions:
(Table: Balance of Payment)Refer to Table: Balance of Payments.The country's balance of payments on current account is:

A) $355 billion.
B) -$395 billion.
C) $375 billion.
D) -$355 billion.

Question 57

Use the following to answer questions:
(Table: Balance of Payment)Refer to Table: Balance of Payments.In this case,the country's balance of payments on goods and services is:

A) $375 billion.
B) -$375 billion.
C) $4 045 billion.
D) $355 billion.

Question 58

The difference between a country's exports and its imports of goods and services is known as the:

A) trade balance.
B) balance of payments on goods and services.
C) balance of payments on the current account.
D) balance of exchange.

Question 59

Canada exports corn to other nations.In the Canadian balance of payments account,this transaction is entered as a payment _____ foreigners in the _____ account.

A) from;current
B) from;financial
C) to;current
D) to;financial

Question 60

Microsoft,a Seattle software company,purchases a new office building in Vancouver,Canada.In the Canadian balance of payments account,this transaction is entered as a payment _____ foreigners in the _____ account.

A) from;current
B) to;financial
C) to;current
D) from;financial

Question 61

Use the following to answer questions:
Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk.
(Scenario: Japan and Canada)Refer to Scenario: Japan and Canada.As a result:

A) capital will flow from Japan to Canada.
B) capital will flow from Canada to Japan.
C) capital will not flow between Japan and Canada.
D) Japan will export more goods to Canada.

Question 62

If asset owners in Japan and Canada consider Japanese and Canadian assets as good substitutes for each other and if the Canadian interest rate is 5%,while the Japanese interest rate is 2%:

A) financial inflows will reduce the Canadian interest rate.
B) financial outflows will reduce the Japanese interest rate.
C) the interest rate gap between Canada and Japan will grow.
D) financial inflows will increase the Canadian interest rate.

Question 63

Use the following to answer questions:
(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the excess of loanable funds supplied by _____ lenders will be exported to _____ borrowers.

A) Canadian;British
B) British;Canadian
C) Canadian or British;British or Canadian
D) Canadian;worldwide

Question 64

Interest rates between two countries tend to converge if:

A) both countries have a financial account surplus.
B) both countries have a current account surplus.
C) the residents of the two countries believe that a foreign asset is as good as a domestic one.
D) the residents of the two countries prefer domestic assets to foreign assets.

Question 65

Use the following to answer questions:
In the absence of international capital flows,the equilibrium interest rate in the Canadian market for loanable funds is 3%,while in Germany,it is 7%.International borrowing and lending between Canada and Germany could result in a common interest rate of _____% and _____.

A) 5;capital inflows to Canada matching the capital outflows from Germany
B) 3;massive capital inflows from Germany to Canada
C) 4;capital outflows from Canada matching the capital inflows to Germany
D) 7;massive capital inflows from Canada to Germany

Question 66

Use the following to answer questions:
(Figure: The Loanable Funds Model in the Canadian Market)Refer to Figure: The Loanable Funds Model in the Canadian Market.If the actual interest rate is higher than 4% in the Canadian market,then the quantity of loanable funds supplied will be _____ the quantity of loanable funds demanded.

A) greater than
B) less than
C) equal to
D) unrelated to

Question 67

Use the following to answer questions:
(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the shortage of loanable funds available to _____ borrowers will be satisfied by _____ lenders.

A) Canadian;British
B) British;Canadian
C) Canadian or British;British or Canadian
D) British;worldwide

Question 68

If asset owners in Japan and Canada consider Japanese and Canadian assets as good substitutes for each other and if the Canadian interest rate is 5% and the Japanese interest rate is 2%,what will NOT occur?

A) Financial inflows will reduce the Canadian interest rate.
B) Financial outflows will increase the Japanese interest rate.
C) The interest rate gap between Canada and Japan will diminish.
D) Loanable funds will be exported from Canada to Japan.

Question 69

Use the following to answer questions:
(Figure: The Loanable Funds Model in the Canadian Market)Refer to Figure: The Loanable Funds Model in the Canadian Market.If the actual interest rate is less than 4% in the Canadian market,then the quantity of loanable funds supplied will be _____ the quantity of loanable funds demanded.

A) greater than
B) less than
C) equal to
D) unrelated to

Question 70

Use the following to answer questions:
(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds demanded by British borrowers is _____ the quantity of loanable funds supplied by British lenders.

A) greater than
B) less than
C) equal to
D) not related to

Question 71

Use the following to answer questions:
Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk.
(Scenario: Japan and Canada)Refer to Scenario: Japan and Canada.The implication is that:

A) interest rates in Japan will increase.
B) interest rates in Canada will decrease.
C) the capital flow between Japan and Canada eventually will render the interest rates equal.
D) the interest rates in both countries will remain unchanged.

Question 72

Use the following to answer questions:
(Figure: The Loanable Funds Model in the Canadian Market)Refer to Figure: The Loanable Funds Model in the Canadian Market.Assume that each country's (Canada and Britain)equilibrium interest rate is 4%.To reconcile the apparent disequilibrium in both markets,assuming that assets and liabilities are viewed as homogeneous,capital _____ will _____ interest rates.

A) outflow from Canada;lower Canadian
B) outflow from Britain;lower British
C) outflow from Britain;raise British
D) inflow to Canada;raise Canadian

Question 73

Use the following to answer questions:
(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the total quantity of loanable funds demanded across the two markets is _____ the total quantity of loanable funds supplied by lenders.

A) greater than
B) less than
C) equal to
D) not related to

Question 74

Use the following to answer questions:
Suppose that the interest rate in Canada is 4%,in Japan it is 7%,and financial assets in the two countries are equal in risk.
Direct foreign investment means the purchase of:

A) stock in foreign companies.
B) bonds of a foreign country.
C) bank loans in a foreign country.
D) factories in a foreign country.

Question 75

When interest rates are higher in country A than in other countries:

A) other countries will borrow more from country A.
B) capital will flow into country A.
C) capital will flow out of country A.
D) country A will lend more to other countries.

Question 76

Use the following to answer questions:
(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds supplied by Canadian lenders is _____ the quantity of loanable funds demanded by Canadian borrowers.

A) greater than
B) less than
C) equal to
D) not related to

Question 77

Use the following to answer questions:
(Figure: The Loanable Funds Model in the Canadian Market)Refer to Figure: The Loanable Funds Model in the Canadian Market.If the actual interest rate is equal to 4% in the Canadian market,then the quantity of loanable funds supplied will be _____ the quantity of loanable funds demanded.

A) greater than
B) less than
C) equal to
D) unrelated to

Question 78

In countries with rapidly growing economies,like China and India,the demand for loanable funds is _____ and interest rates are _____ than in countries with slowly growing economies.

A) larger;higher
B) larger;lower
C) smaller;higher
D) smaller;lower

Question 79

Use the following to answer questions:
(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds supplied by British lenders is _____ the quantity of loanable funds demanded by British borrowers.

A) greater than
B) less than
C) equal to
D) not related to

Question 80

Use the following to answer questions:
(Figure: International Capital Flows)Refer to Figure: International Capital Flows.At an interest rate of 4%,the quantity of loanable funds demanded by Canadian borrowers is _____ the quantity of loanable funds supplied by Canadian lenders.

A) greater than
B) less than
C) equal to
D) not related to