Question 1

Which of the following is NOT considered a payment in the balance of payments?

Accepted Answer

The answer of Which of the following is NOT considered...

Question 2

Make use of a graph of the foreign exchange market to show how the Central Bank of Mexico can use an unsterilized intervention to increase the value of its currency, the peso, in terms of the dollar.

Accepted Answer

The answer of Make use of a graph of the...

Question 3

Discuss the problems associated with the imposition of capital controls.

Accepted Answer

The answer of Discuss the problems associated with the imposition...

Question 4

Which of the following is NOT considered a receipt in the balance of payments?

Accepted Answer

In the balance of payments, receipts are considered to be transactions that bring money into a country. Exports of goods (A), capital inflows (B), and unilateral transfers to U.S. citizens (D) all represent inflows of funds. In contrast, the import of services (C) involves paying money to foreign entities, thus it is considered an outflow, not a receipt.

Question 5

Historically, the leading official reserve asset was

Accepted Answer

Historically, gold has been the leading official reserve asset. It has been used as a store of value and medium of exchange for centuries, and even today, many central banks hold significant amounts of gold in their reserves.

Question 6

Throughout most of the post-World War II period, the use of capital controls by governments around the world was declining. But in the late 1990s, a number of governments expressed renewed interest in capital controls. What accounts for this renewed interest?

Accepted Answer

The answer of Throughout most of the post-World War II...

Question 7

If the U.S. current account balance is negative,

Accepted Answer

A negative current account balance means that the country is importing more goods and services than it is exporting, leading to a deficit in its trade balance. However, this deficit can be offset by a surplus in the financial account, which includes international investments and capital flows. Therefore, it is likely that the U.S. financial account is positive if its current account balance is negative. Option C is incorrect because official settlements, also known as reserves, are used as a last resort to balance payments, but they are not an automatic solution. Option D is incorrect because it is possible for a country's balance of payments to be zero, but it would require a balance in both the current and financial accounts.

Question 8

What alternative to restrictions on capital inflows do some economists recommend to minimize the possibility of increased lending booms and risk taking by domestic banks?

Accepted Answer

The answer of What alternative to restrictions on capital inflows...

Question 9

When someone in a country buys an asset abroad, the transaction is recorded

Accepted Answer

When someone in a country buys an asset abroad, it is considered a capital outflow and is recorded in the financial account as a negative entry. The financial account is part of the balance of payments, which also includes the current account and the official settlements balance.

Question 10

The current account balance plus the financial account balance

Accepted Answer

The current account balance measures the balance of trade in goods and services, while the financial account measures the flow of investment and capital. The sum of these two balances will always equal zero, according to the balance of payments accounting identity. This is because any surplus in one account will be offset by a deficit in the other account. Therefore, the correct answer is D, which states that the sum equals zero.

Question 11

Why do restrictions on capital inflows receive more support from some economists than restrictions of capital outflows?

Accepted Answer

The answer of Why do restrictions on capital inflows receive...

Question 12

In 2011, the net financial account balance was approximately

Accepted Answer

The net financial account balance represents the difference between the inflow and outflow of investments in a country. A positive net financial account balance means that a country received more investments than they invested abroad, while a negative balance means the opposite. The choices that reflect a positive balance are A and C, and the choices that reflect a negative balance are B and D. According to the information provided, the net financial account balance was approximately $394 billion, which means that choice C is the correct answer.

Question 13

The official settlement balance

Accepted Answer

The official settlement balance is defined as the net increase in a country's official reserve assets, which can include foreign currency, gold, and Special Drawing Rights (SDRs). It reflects the overall balance of payments between a country and the rest of the world. It is important for countries to maintain a positive official settlement balance to ensure they have enough foreign currency reserves to cover their international transactions and protect against external shocks.

Question 14

What was the approximate value of the U.S. current account balance in 2011?

Accepted Answer

The answer of What was the approximate value of the...

Question 15

Which of the following is true of the U.S. balance of payments?

Accepted Answer

The U.S. balance of payments includes all inflows of funds from foreigners to the United States, encompassing transactions for goods and services, financial assets, and unilateral transfers.

Question 16

The trade balance is

Accepted Answer

The trade balance represents the difference between a country's exports and imports of goods, which is a major portion of the current account balance, but not the only component. The current account also includes services, income, and current transfers.

Question 17

In the balance-of-payments accounts, the statistical discrepancy

Accepted Answer

The statistical discrepancy in the balance-of-payments accounts likely reflects hidden capital flows, errors in data collection, or unreported transactions, rather than a precise mathematical relationship between the current and capital accounts.

Question 18

When a nation is said to be running a balance of payments surplus, this means its

Accepted Answer

The answer of When a nation is said to be...

Question 19

Make use of a graph of the foreign exchange market to show how the Brazilian Central Bank can use an unsterilized intervention to reduce the value of its currency, the real, in terms of the dollar.

Accepted Answer

The answer of Make use of a graph of the...

Question 20

What accounted for much of policymakers' concern over U.S. current account deficits in the 1980s, 1990s, and 2000s?

Accepted Answer

The concern over U.S. current account deficits in the 1980s, 1990s, and 2000s was mainly due to the fact that the deficits require the U.S. to borrow funds from foreign savers to finance its consumption and investment. This led to an increased reliance on foreign creditors, which could potentially have negative implications for the U.S. economy and the country's global economic position. Additionally, policymakers were concerned about the long-term sustainability of the deficits and the potential for a sharp correction in the future.

Quiz 16: The International Financial System and Monetary Policy

Which of the following is NOT considered a payment in the balance of payments?

Make use of a graph of the foreign exchange market to show how the Central Bank of Mexico can use an unsterilized intervention to increase the value of its currency, the peso, in terms of the dollar.

Discuss the problems associated with the imposition of capital controls.

Which of the following is NOT considered a receipt in the balance of payments?

Historically, the leading official reserve asset was

Throughout most of the post-World War II period, the use of capital controls by governments around the world was declining. But in the late 1990s, a number of governments expressed renewed interest in capital controls. What accounts for this renewed interest?

If the U.S. current account balance is negative,

What alternative to restrictions on capital inflows do some economists recommend to minimize the possibility of increased lending booms and risk taking by domestic banks?

When someone in a country buys an asset abroad, the transaction is recorded

The current account balance plus the financial account balance

Why do restrictions on capital inflows receive more support from some economists than restrictions of capital outflows?

In 2011, the net financial account balance was approximately

The official settlement balance

What was the approximate value of the U.S. current account balance in 2011?

Which of the following is true of the U.S. balance of payments?

The trade balance is

In the balance-of-payments accounts, the statistical discrepancy

When a nation is said to be running a balance of payments surplus, this means its

Make use of a graph of the foreign exchange market to show how the Brazilian Central Bank can use an unsterilized intervention to reduce the value of its currency, the real, in terms of the dollar.

What accounted for much of policymakers' concern over U.S. current account deficits in the 1980s, 1990s, and 2000s?