Question 1

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

Accepted Answer

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

Question 2

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

Accepted Answer

The answer of Suppose a U.S. financial investor purchases bonds...

Question 3

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

Accepted Answer

According to the balance of payments equation, Exports - Imports = Foreign Purchase of Domestic Assets - Domestic Purchase of Foreign Assets. Rearranging this equation, Exports = Imports + Foreign Purchase of Domestic Assets - Domestic Purchase of Foreign Assets.
Plugging in the given values, Exports = $200 billion (foreign purchase of domestic assets) - $100 billion (domestic purchase of foreign assets) + $50 billion (given export value) 
Exports = $150 billion. Therefore, the correct choice is C.

Question 4

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

Accepted Answer

From the balance of payments equation, Boulinas' current account balance (exports minus imports) is equal to its capital account balance (foreign purchases of Boulinas' assets minus Boulinas' purchases of foreign assets). Therefore, imports must equal $150 billion in order to balance out the equation: 
$50 billion (exports) - $150 billion (imports) = -$100 billion (capital outflow) + $200 billion (capital inflow).

Question 5

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

Accepted Answer

The balance on Boulinas' capital account is calculated as the difference between foreign purchases of Boulinas' assets and Boulinas' purchases of foreign assets. Therefore, it is $200 billion (foreign purchase of Boulinas' assets) - $100 billion (Boulinas' purchases of foreign assets) = $100 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, this represents a capital transaction and is recorded as a positive item in the capital account. The capital account measures the flow of funds into and out of a country due to capital transactions, such as investments in stocks, bonds, real estate, and factories. The current account, on the other hand, measures the flow of goods, services, and income in and out of a country.

Question 7

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

Accepted Answer

The balance on the current account is calculated as exports minus imports, which equals $1,000 billion - $950 billion = $50 billion. Purchases of foreign assets are not included in the current account calculation.

Question 8

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

Accepted Answer

The capital account balance is calculated as purchases of foreign assets minus foreign purchases of domestic assets. In this case, purchases of foreign assets equals $900 billion, but there is no information on foreign purchases of domestic assets. Therefore, we cannot calculate the exact balance. However, we know that the current account balance (exports minus imports) is a deficit of $50 billion. In order for the balance of payments to balance overall, the capital account must have a surplus of $50 billion to offset the current account deficit. Therefore, the best choice is B, which represents a capital account surplus of $50 billion, offsetting the current account deficit.

Question 9

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

Accepted Answer

The current account balance is calculated by subtracting the total value of imports and foreign investments in the domestic country from the total value of exports and domestic investments abroad. In this case, Boulinas' exports are $50 billion, and it doesn't mention imports, so we assume they are $0 for this calculation. The purchases of foreign assets ($100 billion) and the foreign purchase of Boulinas' assets ($200 billion) pertain to the financial account, not the current account. Therefore, the current account balance is simply the exports, which are $50 billion. However, none of the provided options correctly matches this explanation, indicating a potential error in the question or answer choices. Based on the given choices, none directly reflect the correct calculation for the current account balance as described.

Question 10

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

Accepted Answer

Salvania's current account balance is calculated as its exports minus its imports, which equals $500 billion - $400 billion = $100 billion. The purchase of assets by foreigners is related to the financial account, not the current account.

Question 11

When U.S. residents purchase foreign assets,

Accepted Answer

When U.S. residents purchase foreign assets, it means they are sending funds out of the U.S., resulting in an outflow of funds from the country. This outflow is recorded as a negative item in the capital account, which tracks cross-border investments and financial flows between countries.

Question 12

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

Accepted Answer

The value of Townsend's assets purchased by foreigners is calculated by balancing the trade and capital flows. The trade surplus is exports minus imports ($1,000 billion - $950 billion = $50 billion). To balance this with the capital outflow from purchasing foreign assets ($900 billion), foreigners must purchase $850 billion of Townsend's assets ($900 billion - $50 billion = $850 billion).

Question 13

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

Accepted Answer

Jaffe's balance on its capital account can be calculated by subtracting the foreign purchase of Jaffe's assets ($100 billion) from its purchases of foreign assets ($200 billion), which gives a net outflow of $100 billion. Therefore, the balance on Jaffe's capital account is equal to the negative of its net outflow, which is $100 billion, so the answer is -$100 billion, or F1F1F1S1F1F1F10$100 billion.

Question 14

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

Accepted Answer

The balance on the capital account is determined by the net flow of financial transactions, such as the purchase of assets. Since foreigners purchased $200 billion worth of assets in Cavland, this indicates a net inflow of $200 billion to the capital account. However, the question seems to confuse the balance of payments components, mixing trade balance (exports minus imports) with capital account transactions. The trade deficit (imports greater than exports by $100 billion) is not directly relevant to calculating the capital account balance from the information given. The correct answer, considering the usual structure of balance of payments, would be a $200 billion increase in the capital account due to asset purchases, but this option is not provided. The closest correct choice, based on the options and question structure, is A) $100 billion, assuming the question intends to reflect a simplified or incorrect interpretation where the trade deficit is offset by the capital inflow, which is not standard economic analysis.

Question 15

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

Accepted Answer

The balance on Grovner's capital account can be calculated by subtracting its imports ($1,000 billion) from its exports ($950 billion) and adding purchases of foreign assets by its citizens ($900 billion). This results in a capital account balance of $50 billion. The correct calculation is $950 billion (exports) - $1,000 billion (imports) + $900 billion (purchases of foreign assets) = $850 billion, but this is the calculation for the financial account, not the capital account. The question seems to confuse capital and financial account terms, but based on the provided options and typical balance of payments structure, the closest correct answer is $50 billion, assuming the question intends to ask about the broader concept of the financial account rather than the narrowly defined capital account.

Question 16

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

Accepted Answer

The current account balance is calculated as exports minus imports. Here, it's $400 billion - $500 billion = -$100 billion. The purchase of assets by foreigners is part of the financial account, not the current account.

Question 17

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

Accepted Answer

Current account balance can be calculated as follows:

Current Account balance = Exports - Imports - Purchases of foreign assets 
Current Account balance = $950 billion - $1,000 billion - $900 billion 
Current Account balance = -$50 billion

Since the balance is negative, it means that Grovner has a current account deficit of $50 billion. Therefore, the correct answer is B, -$50 billion, which is the same as $50 billion deficit.

Question 18

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

Accepted Answer

The answer of Suppose Boulinas' exports equal $50 billion, its...

Question 19

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

Accepted Answer

The value of Grovner's assets purchased by foreigners can be determined by balancing the country's international transactions. Grovner's trade deficit (imports greater than exports) is $50 billion ($1000 billion - $950 billion). To finance this deficit without changing its reserves, Grovner needs inflows from the rest of the world equal to the deficit plus its net outflow of capital for asset purchases by its citizens, which is $900 billion. Therefore, the total inflow required is $950 billion ($50 billion deficit + $900 billion for asset purchases by its citizens), which implies that the value of Grovner's assets purchased by foreigners must be $850 billion to balance the accounts.

Question 20

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

Accepted Answer

The value of foreign assets purchased by Salvania's citizens can be calculated using the current account balance formula: current account balance = exports - imports + net income from abroad + net current transfers from abroad. In this case, we don't have information about net income from abroad or net current transfers from abroad, so we can assume they are zero. Thus, current account balance = $500 billion - $400 billion = $100 billion. Since the capital account must balance the current account, foreign assets purchased by Salvania's citizens must be equal to $100 billion. Therefore, the correct answer is C: $300 billion (foreign assets purchased by foreigners) - $200 billion (foreign assets purchased by Salvania) = $100 billion (foreign assets purchased by Salvania's citizens).

Quiz 30: Government Budgets and Fiscal Policy

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

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

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

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

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

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

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

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

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

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

When U.S. residents purchase foreign assets,

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

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

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

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

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

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

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

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

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