Question 1

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

By definition, the capital account balance is calculated as the difference between purchases of foreign assets by residents and purchases of domestic assets by foreigners. In this case, purchases of foreign assets by Townsend's citizens equal $900 billion. The question does not provide information on purchases of domestic assets by foreigners. Therefore, the capital account balance is equal to $900 billion minus an unknown amount of purchases of domestic assets by foreigners, which is represented by the answer choice F1F1F1S1F1F1F10. Regardless of the unknown value, it is clear that the correct answer is B, $50 billion, as it is the only answer choice that represents a positive capital account balance.

Question 2

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

Grovner's balance on its current account is calculated by subtracting imports from exports, which results in a deficit of $50 billion. However, we also need to consider the purchases of foreign assets by its citizens, which would decrease the deficit by $900 billion. Therefore, the net balance on its current account is actually a surplus of $850 billion (exports - imports + purchases of foreign assets = $950 billion - $1,000 billion + $900 billion = $850 billion). Therefore, the best choice is B, which correctly shows the net balance of $50 billion as a surplus.

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

The value of Jaffe's exports can be found by subtracting the foreign purchases of Jaffe's assets from its purchases of foreign assets and adding that result to Jaffe's exports:

Exports = Purchases of foreign assets - Foreign purchases of Jaffe's assets + Exports
Exports = $200 billion - $100 billion + X (where X is the value of Jaffe's exports)
Exports = $100 billion + X

We are given that Jaffe's exports equal this total amount, which is $150 billion. Therefore, the answer is C.

Question 4

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

According to the balance of payments equation, exports - imports = net capital outflow. Therefore, net capital outflow (or purchases of foreign assets by its citizens) equals $900 billion - ($1,000 billion - $950 billion) = $850 billion. This represents the value of Grovner's assets purchased by foreigners. Therefore, the answer is choice C, $850 billion.

Question 5

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

Since exports minus imports equals purchases of foreign assets minus foreign purchases of domestic assets, we can use this formula to find the value of Townsend's assets purchased by foreigners:

Exports - Imports = Purchases of Foreign Assets - Foreign Purchases of Domestic Assets

$1,000 billion - $950 billion = $900 billion - Foreign Purchases of Domestic Assets

Simplifying the equation:

$50 billion = $900 billion - Foreign Purchases of Domestic Assets

$50 billion + Foreign Purchases of Domestic Assets = $900 billion

Foreign Purchases of Domestic Assets = $850 billion

Therefore, the value of Townsend's assets purchased by foreigners is $850 billion.

Question 6

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

Cavland's current account balance is equal to the difference between its exports and imports, which is -$100 billion. However, when we factor in the $200 billion worth of assets purchased by foreigners, the balance on the financial account is +$200 billion. Therefore, the overall balance of payments for Cavland is $100 billion surplus, which is option B.

Question 7

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 answer of Suppose Grovner's exports equal $950 billion, its...

Question 8

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 the citizens of Salvania can be calculated using the formula: 
Foreign Assets Purchased = Exports - Imports - Foreigners' Assets Purchased 
Substituting the given values: 
Foreign Assets Purchased = $500 billion - $400 billion - $200 billion 
Foreign Assets Purchased = $300 billion. Therefore, the correct answer is C.

Question 9

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 answer of Suppose Cavland's exports equal $400 billion and...

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

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

Question 11

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 12

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 13

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

By using the balance of payments equation: 
Total Exports = Total Imports + Capital Outflows - Capital Inflows
$50 billion = Total Imports + $100 billion - $200 billion
Simplifying the equation, we get:
Total Imports = $100 billion - $50 billion
Total Imports = $150 billion
Therefore, the value of Boulinas' imports is $150 billion.

Question 14

When U.S. residents purchase foreign assets,

Accepted Answer

When U.S. residents purchase foreign assets, funds flow out of the U.S. and into foreign countries. This is recorded as a negative item in the capital account because it represents a reduction in the U.S.'s foreign assets. The current account, on the other hand, records the flow of goods and services between countries, not financial transactions.

Question 15

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 capital account balance can be calculated as foreign purchase of Jaffe's assets ($100 billion) minus Jaffe's purchases of foreign assets ($200 billion), which equals a deficit of $100 billion. However, since the question asks for the balance on Jaffe's capital account, we need to use the opposite sign, giving us a surplus of $100 billion. Therefore, the answer is F1F1F1S1F1F1F10$100 billion.

Question 16

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

Question 17

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, there is an inflow of funds from abroad, which is recorded as a positive item in the capital account. The capital account includes all financial transactions between residents and non-residents, such as foreign investment in domestic assets or domestic investment in foreign assets. The current account, on the other hand, includes transactions of goods and services, income, and current transfers between residents and non-residents. Therefore, the purchase of U.S. assets by foreigners has no impact on the current account.

Question 18

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 19

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

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 Salvania's balance in
Its capital account?

Accepted Answer

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

Quiz 15: Net Exports and International Finance

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 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 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 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 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 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 capital 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 the value of foreign Assets purchased by the citizens of Salvania?

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 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?

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 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 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?

When U.S. residents purchase foreign assets,

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 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 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 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 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?