Question 1

The U.S. balance of payments accounts are prepared and published quarterly by the:

Accepted Answer

The Department of Commerce is responsible for preparing and publishing the U.S. balance of payments accounts on a quarterly basis. This includes tracking the flow of goods, services, and capital between the United States and other countries.

Question 2

Imports and exports of goods and services and unilateral transfers are recorded in which of the following components of a nation's balance of payments accounts?

Accepted Answer

The Current Account records a nation's transactions with the rest of the world, specifically covering imports and exports of goods and services, income from foreign investments, and unilateral transfers.

Question 3

Short-term and long-term investment abroad would be recorded in the _____ of a nation's balance of payments accounts.

Accepted Answer

Short-term and long-term investments abroad are recorded in the Capital Account of a nation's balance of payments. This account tracks the flow of investment funds between countries, including investments in foreign stocks, bonds, and real estate.

Question 4

Changes in government holdings of foreign currency, gold and special drawing rights at the International Monetary Fund would be reflected in the _____ on a nation's balance of payments accounts.

Accepted Answer

Changes in government holdings of foreign currency, gold, and special drawing rights at the International Monetary Fund are reflected in the official reserve transactions on a nation's balance of payments accounts. This section tracks the changes in a country's reserves, which are assets held by the central bank to balance payments and influence currency exchange rates.

Question 5

All of the following items except one are credit entries in a nation's balance of payments. Which one is not a credit entry?

Accepted Answer

Gifts of money sent abroad are considered debit entries in a nation's balance of payments because they represent an outflow of funds from the country.

Question 6

All of the following items except one are debit entries in a nation's balance of payments. Which one is not a debit entry?

Accepted Answer

Foreign purchases of securities issued by domestic firms and units of government are credit entries, as they represent an inflow of funds into the country.

Question 7

An international monetary system in which virtually all international transactions take place in convertible currencies with gold bullion little used for this purpose, but each currency is freely convertible into gold at a fixed rate (and into other currencies) is known as the:

Accepted Answer

The gold exchange standard is a system where currencies are pegged to gold but the actual transactions are carried out using convertible currencies. Each currency is freely convertible into gold at a fixed rate, facilitating international trade and investment by providing stability and predictability in exchange rates.

Question 8

The international monetary system in which foreign currency prices are linked to the U.S. dollar and gold, the dollar is tied to gold at a fixed price and central banks are obligated to intervene in the currency markets to keep their home currency's exchange rate with the dollar within a narrowly defined band is called the:

Accepted Answer

The answer of The international monetary system in which foreign...

Question 9

The international monetary system in which each nation is allowed to choose its own exchange rate policy and may intervene in the foreign exchange markets to protect its own national currency and correct short-term disorderly conditions, provided the welfare of other countries is taken into account, is called the:

Accepted Answer

The Managed floating currency standard allows countries to choose their own exchange rate policies and intervene in foreign exchange markets to protect their currency, considering the welfare of other countries, which matches the description given.

Question 10

An official monetary reserve unit designed to settle international claims arising from transactions between the IMF, member governments, central banks and international agencies is known as:

Accepted Answer

SDR (Special Drawing Rights) is an international reserve asset created by the IMF to supplement its member countries' official reserves, facilitating international financial transactions and settlements.

Question 11

The major transactions captured in a nation's balance of payments accounts include all the following except:

Accepted Answer

The balance of payments accounts capture international transactions, including exports and imports of goods and services, expenditures by tourists, income from overseas investments, and government loans abroad. The surplus or deficit in the federal government's official budget is a domestic financial activity and is not included in the balance of payments accounts.

Question 12

Services included in a nation's balance of payments accounts include all of the following items except:

Accepted Answer

All the options listed (A, B, C, D) are indeed included in the services account of a nation's balance of payments. The services account records transactions for services provided to or received from foreign entities, such as tourism, medical services, investment income, and transportation services.

Question 13

American gift giving and charitable contributions overseas are recorded in which balance of payments accounts?

Accepted Answer

Gifts and charitable contributions overseas are considered transfers, which are recorded in the current account, not listed among the options provided.

Question 14

If a business headquartered inside the United States establishes affiliated companies in Europe and Japan, but gathers the net income from these affiliated companies and returns it to the United States, this is known as:

Accepted Answer

Repatriation of funds refers to the process of returning the net income or profits earned from foreign investments back to the company's home country, which in this case is the United States. This process is common for multinational corporations that operate in various countries but consolidate their earnings in their home country.

Question 15

The agency which establishes rules for settling international balance-of-payments accounts between nations is known as the:

Accepted Answer

The International Monetary Fund (IMF) is responsible for establishing rules for settling international balance-of-payments accounts between nations, aiming to ensure global financial stability.

Question 16

The five IMF nations whose currency values and exports are used as the basis for valuing SDRs are:

Accepted Answer

The SDR is valued based on a basket of five currencies: the U.S. dollar, the euro, the Chinese yuan, the Japanese yen, and the British pound.

Question 17

The sale of IBM computers in France will be recorded as a:

Accepted Answer

The sale of IBM computers in France represents an export of goods from the United States, which is recorded as a credit item on the current account.

Question 18

Lloyd's of London provides insurance to a U.S. corporation. This will be recorded as a:

Accepted Answer

Insurance payments to foreign companies, such as Lloyd's of London, by U.S. corporations are recorded as debit items on the current account because they represent a purchase of services from abroad.

Question 19

The purchase of real estate in the U.S. by a Group of Japanese investors will be recorded as a:

Accepted Answer

The purchase of real estate in the U.S. by a Group of Japanese investors will be recorded as a credit item on the capital account because it represents an inflow of foreign capital into the U.S.

Question 20

A decline in inflation in the U.S. relative to other countries should make American products:

Accepted Answer

A decline in inflation in the U.S. relative to other countries would make American products more competitive because they would become relatively cheaper compared to foreign products, increasing their attractiveness in international markets.

Quiz 23: International Financial Transactions and Balance of Payments