Question 1

The current account can be defined as exports plus imports.

Accepted Answer

The current account is a broader measure than just exports and imports. It includes merchandise trade, services trade, income receipts, and unilateral transfers.

Question 2

How are the current account and the financial account related?

Accepted Answer

The answer of How are the current account and the...

Question 3

Explain how BOP disequilibrium is restored under
(a) flexible exchange rates.
(b) fixed exchange rates,after you define what a BOP disequilibrium means.

Accepted Answer

The answer of Explain how BOP disequilibrium is restored under
(a)...

Question 4

The U.S.is the world's largest creditor.

Accepted Answer

The U.S. is the world's largest debtor, with a national debt exceeding $23 trillion as of 2020.

Question 5

How are the following transactions entered into the U.S.balance of payments?
(a) The U.S.government sends $2,000 worth of food aid to Africa.
(b) A U.S.firm exports $10,000 worth of goods to the United Kingdom,payable in 3 months.
(c) A U.S.tourist in Amsterdam spends $200 for food and hotels.

Accepted Answer

The answer of How are the following transactions entered into...

Question 6

Answer the following questions briefly.
(a) Is it possible for each nation to have BOP surpluses? Explain.
(b) What is the "statistical anomaly" that imparts a bias to trade balances?
(c) Is it correct to argue that deficit countries are harmed while surplus countries benefit by international free trade?
(d) How is the balance of payments linked to national saving and investment?

Accepted Answer

The answer of Answer the following questions briefly.
(a) Is it...

Question 7

Define the official settlements balance. Is there any difference between the United States and other countries in terms of what this balance measures? How does this affect the ability of the countries to run current account deficits?

Accepted Answer

The answer of Define the official settlements balance. Is there...

Question 8

Large current account deficits imply large financial account surpluses.

Accepted Answer

A large current account deficit usually means that a country is importing more than it is exporting, and it is financing this deficit by borrowing from foreign lenders or selling domestic assets to foreigners, which is recorded as a financial account surplus.

Quiz 11: The Balance of Payments

The current account can be defined as exports plus imports.

How are the current account and the financial account related?

Explain how BOP disequilibrium is restored under (a) flexible exchange rates. (b) fixed exchange rates,after you define what a BOP disequilibrium means.

The U.S.is the world's largest creditor.

How are the following transactions entered into the U.S.balance of payments? (a) The U.S.government sends $2,000 worth of food aid to Africa. (b) A U.S.firm exports $10,000 worth of goods to the United Kingdom,payable in 3 months. (c) A U.S.tourist in Amsterdam spends $200 for food and hotels.

Define the official settlements balance. Is there any difference between the United States and other countries in terms of what this balance measures? How does this affect the ability of the countries to run current account deficits?

Large current account deficits imply large financial account surpluses.