Question 1

Suppose Townsend's exports equal $1,000 billion, its imports equal $950 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is Townsend's balance on its capital account?

Accepted Answer

The answer of Suppose Townsend's exports equal $1,000 billion, its...

Question 2

Suppose Cavland's exports equal $400 billion and its imports equal $500 billion. JForeigners purchased $200 billion worth of assets in Cavland. What is Cavland's
Jbalance on its current account?

Accepted Answer

Cavland's current account balance is equal to the difference between exports and imports, plus net income from abroad, plus net transfers. In this case, the exports are $400 billion and the imports are $500 billion, resulting in a deficit of $100 billion. However, foreigners purchased $200 billion worth of assets in Cavland, which is considered a capital inflow and is therefore subtracted from the current account balance. Therefore, the current account balance is -$100 billion (or -$100,000,000,000), which is equivalent to choice B.

Question 3

Suppose a U.S. financial investor purchases bonds issued by the government of Peru. How Jwill this transaction be recorded in U.S. international transactions?

Accepted Answer

The purchase of foreign bonds by a U.S. investor is recorded in the capital account as a negative item because it represents an outflow of capital from the U.S. to another country.

Question 4

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is the value of Grovner's
Jassets purchased by foreigners?

Accepted Answer

According to the balance of payments equation, the current account (exports minus imports) plus the capital account (net purchases of foreign assets) must equal zero. Therefore, Grovner's assets purchased by foreigners can be calculated by subtracting the current account balance (exports minus imports) from Jpurchases of foreign assets by its citizens.

Assets purchased by foreigners = Jpurchases of foreign assets by Grovner's citizens - (Grovner's exports - Grovner's imports)
Assets purchased by foreigners = $900 billion - ($950 billion - $1,000 billion)
Assets purchased by foreigners = $900 billion - (-$50 billion)
Assets purchased by foreigners = $850 billion

Therefore, the correct answer is C) $850 billion.

Question 5

Suppose Townsend's exports equal $1,000 billion, its imports equal $950 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is the value of
JTownsends' assets purchased by foreigners?

Accepted Answer

By the balance of payments identity, a country's current account (which includes exports and imports of goods and services) plus its capital account (which includes purchases and sales of assets by its citizens and foreigners) must equal zero. Therefore, the value of JTownsends' assets purchased by foreigners can be found by subtracting Townsend's exports ($1,000 billion) and imports ($950 billion) from its citizens' purchases of foreign assets ($900 billion), which is $850 billion.

Question 6

When foreigners purchase U.S. assets, there is an inflow of funds from abroad and this is recorded as a

Accepted Answer

When foreigners purchase U.S. assets, it represents an inflow of funds from abroad, which is recorded as a positive item in the capital account. The current account, on the other hand, records transactions for the sale and purchase of goods and services, and does not include capital transactions such as investment in assets.

Question 7

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100 Jbillion, and foreign purchase of Boulinas' assets equal $200 billion. What is Boulinas'
Jbalance on its current account?

Accepted Answer

Boulinas' current account balance can be calculated as the difference between exports and purchases of foreign assets, which equals -$50 billion. Since foreign purchase of Boulinas' assets is counted as a negative in the current account balance calculation, it is subtracted from the -$50 billion, resulting in a current account balance of -$150 billion. However, since the question asks for the absolute value of the current account balance, the answer is $100 billion (which is equal to the absolute value of -$150 billion). Therefore, choice B is the best choice.

Question 8

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. JForeigners purchased $200 billion worth of assets in Salvania. What is the value of foreign
Jassets purchased by the citizens of Salvania?

Accepted Answer

To find the value of foreign assets purchased by the citizens of Salvania, we need to calculate the current account balance, which is equal to exports minus imports plus net foreign investment.

Current account balance = $500 billion - $400 billion + $200 billion = $300 billion

Therefore, the value of foreign assets purchased by citizens of Salvania is $300 billion.

Question 9

Suppose Cavland's exports equal $400 billion and its imports equal $500 billion. JForeigners purchased $200 billion worth of assets in Cavland. What is Cavland's
Jbalance on its capital account?

Accepted Answer

Cavland's capital account balance is calculated by subtracting the value of assets purchased by foreigners ($200 billion) from the trade deficit ($100 billion, which is exports minus imports). Thus, the capital account balance is $100 billion.

Question 10

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100 Jbillion, and foreign purchase of Boulinas' assets equal $200 billion. What is Boulinas'
Jbalance on its current account?

Accepted Answer

Boulinas' current account balance can be calculated as the difference between exports and purchases of foreign assets, which equals -$50 billion. Since foreign purchase of Boulinas' assets is counted as a negative in the current account balance calculation, it is subtracted from the -$50 billion, resulting in a current account balance of -$150 billion. However, since the question asks for the absolute value of the current account balance, the answer is $100 billion (which is equal to the absolute value of -$150 billion). Therefore, choice B is the best choice.

Question 11

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. JForeigners purchased $200 billion worth of assets in Salvania. What is Salvania's balance in its current account?

Accepted Answer

The current account balance is calculated as exports minus imports. Salvania's exports are $500 billion and imports are $400 billion, resulting in a current account balance of $100 billion.

Question 12

Suppose Townsend's exports equal $1,000 billion, its imports equal $950 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is Townsend's balance on its current account?

Accepted Answer

Current account balance = Exports - Imports = $1,000 billion - $950 billion = $50 billion. The purchase of foreign assets by citizens (capital account) is not included in the calculation of the current account balance.

Question 13

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100 Jbillion, and foreign purchase of Boulinas' assets equal $200 billion. What is Boulinas'
Jbalance on its capital account?

Accepted Answer

The capital account balance is calculated as the foreign purchase of domestic assets minus the domestic purchase of foreign assets. Here, it is $200 billion (foreign purchase of Boulinas' assets) minus $100 billion (Boulinas' purchases of foreign assets), resulting in a $100 billion capital account balance.

Question 14

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. JForeigners purchased $200 billion worth of assets in Salvania. What is Salvania's balance in
Jits capital account?

Accepted Answer

The answer of Suppose Salvania's exports equal $500 billion and...

Question 15

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is Grovner's balance on its current account?

Accepted Answer

Current account balance = Exports - Imports - Purchases of foreign assets by citizens
= $950 billion - $1,000 billion - $900 billion
= -$50 billion
Since the balance is negative, it represents a current account deficit. The correct option is B, which represents a deficit of $50 billion.

Question 16

Suppose Jaffe's exports equal $50 billion, its purchases of foreign assets equal $200 Jbillion, and foreign purchase of Jaffe's assets equal $100 billion. What is the value of Jaffe's
Jexports?

Accepted Answer

Using the balance of payments equation: Current Account + Capital Account = 0.
Jaffe's Current Account balance would be:

Exports - Foreign Purchases of Jaffe's assets = $50 billion - $100 billion = -$50 billion

Therefore, Jaffe's Capital Account balance would be:

Purchases of Foreign Assets = $200 billion

Capital Account balance of $200 billion must offset Jaffe's Current Account balance of -$50 billion, so:

Capital Account = -Current Account
$200 billion = -$50 billion + X
X = $150 billion

Thus, Jaffe's exports would be $150 billion.

Question 17

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100 Jbillion, and foreign purchase of Boulinas' assets equal $200 billion. What is the value of
JBoulinas' imports?

Accepted Answer

By using the balance of payments equation, we know that Exports - Imports = Foreign Purchase of Assets - Purchases of Foreign Assets. 
Thus, Imports = Foreign Purchase of Assets - Purchases of Foreign Assets - Exports 
Substituting the given values, we get: 
Imports = $200 billion - $100 billion - $50 billion 
Imports = $150 billion

Question 18

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is Grovner's balance on its capital account?

Accepted Answer

The capital account balance is calculated as the net flow of financial assets. Since Grovner's citizens purchase $900 billion in foreign assets, and the trade deficit (exports - imports) is $50 billion, the capital account balance is $50 billion to offset the trade deficit.

Question 19

Suppose Jaffe's exports equal $50 billion, its purchases of foreign assets equal $200 Jbillion, and foreign purchase of Jaffe's assets equal $100 billion. What is Jaffe's balance on its capital account?

Accepted Answer

The capital account records the net change in a country's ownership of foreign assets and foreign ownership of domestic assets. In this case, Jaffe's exports are $50 billion, its purchases of foreign assets are $200 billion, and foreign purchases of Jaffe's assets are $100 billion. So, Jaffe's net capital outflow is $200 billion - $100 billion = $100 billion.

Question 20

When U.S. residents purchase foreign assets,

Accepted Answer

When U.S. residents purchase foreign assets, there is an outflow of funds from the U.S., making it a negative item in the capital account. The current account records transactions related to imports, exports, and other goods and services.

Quiz 15: Net Exports and International Finance

Suppose Townsend's exports equal $1,000 billion, its imports equal $950 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is Townsend's balance on its capital account?

Suppose Cavland's exports equal $400 billion and its imports equal $500 billion. JForeigners purchased $200 billion worth of assets in Cavland. What is Cavland's Jbalance on its current account?

Suppose a U.S. financial investor purchases bonds issued by the government of Peru. How Jwill this transaction be recorded in U.S. international transactions?

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is the value of Grovner's Jassets purchased by foreigners?

Suppose Townsend's exports equal $1,000 billion, its imports equal $950 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is the value of JTownsends' assets purchased by foreigners?

When foreigners purchase U.S. assets, there is an inflow of funds from abroad and this is recorded as a

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100 Jbillion, and foreign purchase of Boulinas' assets equal $200 billion. What is Boulinas' Jbalance on its current account?

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. JForeigners purchased $200 billion worth of assets in Salvania. What is the value of foreign Jassets purchased by the citizens of Salvania?

Suppose Cavland's exports equal $400 billion and its imports equal $500 billion. JForeigners purchased $200 billion worth of assets in Cavland. What is Cavland's Jbalance on its capital account?

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100 Jbillion, and foreign purchase of Boulinas' assets equal $200 billion. What is Boulinas' Jbalance on its current account?

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. JForeigners purchased $200 billion worth of assets in Salvania. What is Salvania's balance in its current account?

Suppose Townsend's exports equal $1,000 billion, its imports equal $950 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is Townsend's balance on its current account?

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100 Jbillion, and foreign purchase of Boulinas' assets equal $200 billion. What is Boulinas' Jbalance on its capital account?

Suppose Salvania's exports equal $500 billion and its imports equal $400 billion. JForeigners purchased $200 billion worth of assets in Salvania. What is Salvania's balance in Jits capital account?

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is Grovner's balance on its current account?

Suppose Jaffe's exports equal $50 billion, its purchases of foreign assets equal $200 Jbillion, and foreign purchase of Jaffe's assets equal $100 billion. What is the value of Jaffe's Jexports?

Suppose Boulinas' exports equal $50 billion, its purchases of foreign assets equal $100 Jbillion, and foreign purchase of Boulinas' assets equal $200 billion. What is the value of JBoulinas' imports?

Suppose Grovner's exports equal $950 billion, its imports equal $1,000 billion, and Jpurchases of foreign assets by its citizens equals $900 billion. What is Grovner's balance on its capital account?

Suppose Jaffe's exports equal $50 billion, its purchases of foreign assets equal $200 Jbillion, and foreign purchase of Jaffe's assets equal $100 billion. What is Jaffe's balance on its capital account?

When U.S. residents purchase foreign assets,