Question 1

Which of the following is not a non-produced,non-financial asset?

Accepted Answer

A share in a company is a financial asset as it represents ownership in a company and can be traded in financial markets. Copyrights, patents, and rights to natural resources are all non-produced, non-financial assets.

Question 2

Which of the following is not included in the current account?

Accepted Answer

The current account measures the flow of goods, services, income, and unilateral transfers between a country and the rest of the world. An increase in holdings of overseas assets by Australians would fall under the capital account, which measures the flow of financial investments between a country and the rest of the world. Therefore, choice D is not included in the current account.

Question 3

The major difference between an open economy and a closed economy is that

Accepted Answer

An open economy interacts with the rest of the world through trade and investment flows, while a closed economy does not engage in such transactions with other countries. The other choices are not accurate descriptions of the difference between open and closed economies.

Question 4

When Australia sends money to the Philippines to help typhoon survivors,the transaction is recorded in the

Accepted Answer

The current account records transactions involving the exchange of goods, services, and transfers between countries. Sending money to typhoon survivors in the Philippines would be considered a transfer and therefore recorded in the current account. The capital account records transactions related to the buying and selling of assets, while the financial account records transactions involving investment flows. The foreign exchange account is not a recognized accounting category.

Question 5

Since the 1970s in Australia,net primary income has been

Accepted Answer

The answer of Since the 1970s in Australia,net primary income...

Question 6

The record of a country's transactions in goods,services and assets with the rest of the world is its

Accepted Answer

The balance of payments is a comprehensive record of a country's economic transactions with the rest of the world including the current account, financial account, and capital account. The current account records transactions in goods and services, while the financial account records transactions in assets such as investments and loans. The balance of trade, on the other hand, only records a country's transactions in goods with the rest of the world. Therefore, the best choice is (C) balance of payments.

Question 7

Which of the following would increase the size of the deficit in the current account of Australia?

Accepted Answer

A decrease in exports means that Australia is selling fewer goods and services to other countries, resulting in less income coming into the country and increasing the deficit in the current account.

Answer: D
 A decrease in the amount of income Australian companies pay to foreigners who own investments in Australia means that foreign investors are receiving less income from their investments in Australia. This means less money is leaving the country, resulting in a smaller deficit in the current account. Therefore, this option would not increase the size of the deficit.

Therefore, the best choice that would increase the size of the deficit in the current account of Australia is C (a decrease in exports).

Question 8

The balance of payments includes all of the following accounts except the

Accepted Answer

The balance of payments includes the current account, financial account, and capital account, but not the national debt account. The national debt account is related to government borrowing and is not directly related to international transactions.

Question 9

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 is no interaction in terms of trade or finance with other economies.

Question 10

Which of the following is a capital inflow into Australia?

Accepted Answer

A capital inflow refers to the movement of funds from foreign countries to Australia. Option C is a capital inflow as a Chinese investor is buying an Australian government bond, which means that funds are being transferred from China to Australia. Options A and D are not capital inflows as both Australian investors and firms are investing in foreign bonds, which means that funds are being transferred out of Australia. Option B is a foreign direct investment, which refers to investment in a foreign country by a company based in another country. It is not a capital inflow as the investment is being made by an Australian firm in Indonesia, which means that funds are being transferred from Australia to Indonesia.

Question 11

Since the 1980s in Australia,the balance on goods and services has

Accepted Answer

Since the 1980s, Australia's balance on goods and services has usually been negative, indicating that the value of imports has been greater than the value of exports. This has resulted in a current account deficit, which has been financed by capital inflows into the financial account.

Question 12

A country's balance of payments is best described as a system that records

Accepted Answer

A country's balance of payments records all international trading, borrowing and lending flows, including the physical flow of goods and services between countries, as well as flows of investment. It includes both official transactions between governments and private transactions between individuals and companies.

Question 13

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

Accepted Answer

The purchase of goods and services, such as a car, by foreigners (in this case, an Australian citizen buying a Mercedes-Benz made in Germany) affects the trade balance, which is a component of a country's current account. Transactions involving financial assets, like purchasing shares (options A and B), are part of the financial account, not the current account. Option C involves a domestic transaction that does not impact the current account.

Question 14

Any ________ by Australian residents from overseas are ________ additions to the current account.

Accepted Answer

Payments received by Australian residents from overseas are positive additions to the current account because they represent income flowing into the country. Therefore, options A, B, and D are incorrect.

Question 15

In 2012/13,Australia

Accepted Answer

In 2012/13, Australia experienced a trade deficit, meaning it imported more goods and services than it exported.

Question 16

A goods trade deficit indicates that a

Accepted Answer

A goods trade deficit means that a country's imports of physical goods exceed its exports of physical goods, indicating that the country is buying more from foreign countries than it is selling to them. Therefore, the best choice is A.

Question 17

The balance of payments is a

Accepted Answer

The balance of payments is a summary record of a country's financial transactions with other countries, including both goods and services as well as financial transactions such as investments and loans. It includes both imports and exports of goods and services, as well as financial flows such as foreign aid, investment income, and remittances from individuals living abroad.

Question 18

The current account includes records of a country's

Accepted Answer

The current account of a country's balance of payments includes all of the above-mentioned factors such as net exports, net primary income (income earned by a country's residents from abroad minus income earned by foreigners in the country) and net secondary income (transfers of money between countries). Therefore, option D is the correct choice.

Question 19

If an Australian company sells insurance to a foreign company,how does this affect Australia's balance of payments?

Accepted Answer

Selling insurance to a foreign company counts as an export of services, which is a credit to the current account of Australia's balance of payments. This means that the best choice is A, as it increases exports of services.

Question 20

The current account balance equals

Accepted Answer

The current account balance reflects the balance of trade on goods and services, which is exports of goods and services minus imports of goods and services, and also includes net primary income (income from labor and investment) and net secondary income (foreign aid and remittances). Therefore, option C accurately represents the equation for the current account balance.

Quiz 19: Comparative Advantage, international Trade, and Exchange Rates