Question 1

Since 1999, the capital account has recorded

Accepted Answer

The answer of Since 1999, the capital account has recorded
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Question 2

An economy that does not have interactions in trade or finance with other economies is referred to as

Accepted Answer

A closed economy is one in which there are no interactions in trade or finance with other economies. It is self-sufficient and does not import or export any goods or services, nor does it engage in foreign investment.

Question 3

If foreign holdings of U.S. dollars increase, holding all else constant

Accepted Answer

When foreign holdings of U.S. dollars increase, it implies an increase in demand for U.S. assets. This will lead to an increase in the U.S. financial account balance since foreigners would need to purchase U.S. assets using their currency. Holding all else constant, the balance on the current account and capital account will not be affected. The U.S. balance of trade is unlikely to be affected directly by an increase in foreign holdings of U.S. dollars.

Question 4

Which of the following would decrease net exports in the United States?

Accepted Answer

Purchasing goods from another country (imports) increases the import component of the net exports calculation, thereby decreasing net exports. Choices B, C, and D do not directly affect goods and services being exported or imported.

Question 5

China runs a current account surplus with the United States. Which of the following must be true about China's balance of payments with the United States?

Accepted Answer

China running a current account surplus with the United States means that it is exporting more goods and services to the United States than it is importing from them. This leads to an excess of US dollars in China, which must be absorbed through a financial account deficit. Therefore, choice A is true. Choices B and C are incorrect as they relate to the balance of trade, which is only a part of the current account. Choice D is incorrect as a current account surplus does not necessarily imply a deficit in the overall balance of payments.

Question 6

Net foreign investment is equal to

Accepted Answer

Net foreign investment is the sum of a country's net foreign direct investment (FDI) and net foreign portfolio investment. It represents the total amount of investment capital that flows into a country from abroad minus the capital that flows out of the country.

Question 7

In 2016, global revenue for Amazon was ________ when measured in local currencies than it was when measured in dollars. This occurred because the value of the U.S. dollar ________ relative to most other currencies.

Accepted Answer

When the value of the U.S. dollar increases relative to other currencies, revenues generated in those currencies translate into fewer dollars, making the revenue appear higher when measured in local currencies.

Question 8

If the balance of the current account in the United States is -$900 billion, which of the following is most likely to be true?

Accepted Answer

The balance on the financial account is likely to be positive because a deficit in the current account (such as a -$900 billion balance) typically means that the country is importing more than it is exporting, which must be financed by inflows in the financial account, reflecting borrowing or selling domestic assets to foreigners.

Question 9

The balance of trade includes trade in

Accepted Answer

The answer of The balance of trade includes trade in
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Question 10

Which of the following would result in a trade surplus for the United States?

Accepted Answer

Exports of goods and services exceed imports of goods and services.

Question 11

If the current account is in deficit and the capital account is zero, then

Accepted Answer

In a balance of payments system, a current account deficit means that a country is importing more than it exports in terms of goods and services. This implies a demand for foreign currency, which requires a surplus in the financial account to finance. Therefore, if the capital account is zero, the financial account must be in surplus to cover the current account deficit.

Question 12

An increase in United States net foreign direct investment would occur if

Accepted Answer

Net foreign direct investment refers to the amount of money that flows into a country as a result of citizens or companies building or purchasing facilities in foreign countries. Therefore, an increase in United States net foreign direct investment would occur if United States citizens increase their building or purchasing of facilities in foreign countries.

Question 13

The current account includes records of a country's

Accepted Answer

The current account includes all three items listed in the answer choices. Net exports record a country's exports minus imports, net investment income includes income received from foreign investments minus payments made to foreign investors, and net transfers refer to government and private transfers from one country to another. Therefore, all of the above are included in an economy's current account.

Question 14

The United States usually exports ________ goods than it imports and exports ________ services than it imports.

Accepted Answer

The United States typically exports fewer goods than it imports, resulting in a goods trade deficit. However, it exports more services than it imports, leading to a services trade surplus.

Question 15

When net capital flows are positive

Accepted Answer

The answer of When net capital flows are positive
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Question 16

Which of the following transactions would be included in Germany's current account?

Accepted Answer

Transactions included in a country's current account typically involve the trade of goods and services. The purchase of a new Volkswagen made in Germany by an American citizen (D) is an export of goods, which is recorded in the current account. Choices A and B involve financial transactions not recorded in the current account, and choice C is a domestic transaction that does not affect international trade balances.

Question 17

When a foreign investor buys a bond issued in the United States

Accepted Answer

When a foreign investor buys a bond issued in the United States, it represents a financial transaction and therefore increases the balance on the financial account. The capital account measures non-financial transactions such as the transfer of assets, while the current account measures the flow of goods, services, and income. The balance of trade is specifically related to the exchange of goods and services and would not be affected by the purchase of a bond.

Question 18

Which of the following is an example of foreign direct investment in China?

Accepted Answer

Foreign direct investment (FDI) involves a company or individual from one country making a physical investment into building a business in another country. In this case, Wal-Mart buying a warehouse in Shanghai is an example of FDI in China.

Question 19

Which of the following would increase the balance on the current account?

Accepted Answer

An increase in the balance of trade (the difference between a country's exports and imports) would increase the balance on the current account, as it indicates that the country is exporting more than it is importing, contributing positively to its current account balance.

Question 20

If the balance on the current account is $346 billion and the balance on the financial account is -$204 billion, what is the balance on the capital account, assuming no statistical discrepancy?

Accepted Answer

The answer of If the balance on the current account...

Quiz 29: Macroeconomics in an Open Economy