Question 1

What is the difference between a net borrower nation, a net lender nation, a debtor nation and a creditor nation?

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Question 2

What balance of payment account records foreign investment between countries?

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Question 3

What is the relationship between net borrower, net lender, debtor nation, and creditor nation?

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Question 4

Looking at the U.S. balance of payments for the last two decades, how have the current account and the capital account changed?

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Question 5

Define official settlements account and U.S. official reserves. Discuss the differences between the two terms.

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Question 6

What role can the Fed play in the foreign exchange market?

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Question 7

What is purchasing power parity?

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Question 8

What is the relationship between net exports, the government sector surplus or deficit, and the private sector surplus or deficit?

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Question 9

"If the official settlements balance is zero, a current account surplus must equal the capital account deficit." Is the previous statement correct or incorrect? Briefly explain your answer.

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Question 10

"Fluctuations in exchange rates, other things remaining the same, creates a situation in which money buys the same amount of goods and services in different currencies." What does the previous statement describe? Will these fluctuations occur in the short run or the long run?

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Question 11

"Although the United States is running a large current account deficit, it is still ranked as a major international net lender." Is the previous statement correct or incorrect? Briefly explain your answer.

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Question 12

When a nation has no funds to finance economic development, how can it acquire the needed funds? Is the country a net lender or a net borrower?

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Question 13

What is a "debtor nation?" Is the United States a debtor nation?

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Question 14

What are the main components of the current account? What has been the recent U.S. experience with these items?

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Question 15

Define net borrower, net lender, creditor nation, and debtor nation. Discuss the difference between a net borrower and a debtor nation.

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Question 16

Saving is S, investment is I, net taxes is NT, government expenditure is G, exports is X, and imports is M. Using these symbols, what is the relationship among the saving, investment, net taxes, government expenditure, exports, and imports?

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Question 17

If U.S. official reserves increase, is the official settlements account balance positive, negative, or unaffected?

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Question 18

What are the three balance of payments accounts? Briefly describe them. What is the relationship among the three?

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Question 19

How do the capital account and the current account differ?

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Question 20

"The current account records foreign investment in a nation minus investment abroad." Is the previous statement correct or incorrect?

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Quiz 9: The Exchange Rate and the Balance of Payments