Question 1

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

Accepted Answer

Cavland has a trade deficit of $100 billion (exports of $400 billion minus imports of $500 billion). To balance this, Cavland's citizens must have purchased $100 billion worth of foreign assets, as foreigners purchased $200 billion worth of assets in Cavland.

Question 2

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 a capital transaction and involves a transfer of ownership rights, resulting in an inflow of funds from abroad. Therefore, it is recorded as a positive item in the capital account. The current account, on the other hand, records transactions related to imports, exports, and other income flows.

Question 3

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

Townsend's balance on its capital account is equal to the difference between its purchases of foreign assets by its citizens and purchases of domestic assets by foreigners. Since the information provided only includes purchases of foreign assets by Townsend's citizens, we cannot determine the balance on its capital account directly. However, we can use the identity that a country's current account balance plus its capital account balance should equal zero (assuming no statistical discrepancy). Thus, we can calculate Townsend's current account balance by subtracting its imports from its exports:

Current account balance = exports - imports = $1,000 billion - $950 billion = $50 billion

Since the capital account balance must be equal in magnitude and opposite in sign to the current account balance, we can conclude that Townsend's capital account balance is:

Capital account balance = -$50 billion

However, the options presented are in terms of positive numbers, so we can use the absolute value of the capital account balance, which is $50 billion. Thus, the correct answer is B) $50 billion.

Question 4

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 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 ($500 billion - $400 billion).

Question 5

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 balance on its current account is equal to its exports minus imports, which is -$100 billion. However, since foreigners purchased $200 billion in assets, this would result in a positive capital account balance of $200 billion. Therefore, the overall balance of payments for Cavland would be a surplus of $100 billion, which is represented by choice B.

Question 6

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 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 balance on the capital account is calculated as the difference between the purchases of foreign assets by citizens and the net exports (exports minus imports). Here, Grovner's net exports are -$50 billion ($950 billion - $1,000 billion). The capital account balance is $900 billion (purchases of foreign assets) minus the net exports of -$50 billion, resulting in a capital account balance of $50 billion.

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 current account?

Accepted Answer

Townsend's current account balance is equal to its exports minus its imports. In this case, Townsend's exports are $1,000 billion and its imports are $950 billion, so its current account balance is $1,000 billion - $950 billion = $50 billion.

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 the value of
Boulinas' imports?

Accepted Answer

Boulinas' imports can be calculated using the formula: Imports = Exports + Net Capital Outflow. Here, Net Capital Outflow = Purchases of foreign assets - Foreign purchase of Boulinas' assets = $100 billion - $200 billion = -$100 billion. Therefore, Imports = $50 billion + (-$100 billion) = $150 billion.

Question 10

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

Boulinas' current account balance is equal to its exports minus its imports plus its net foreign asset purchases. In this case, Boulinas' exports are $50 billion, its imports are $200 billion, and its net foreign asset purchases are -$100 billion (since it purchased $100 billion of foreign assets and sold $200 billion of its own assets). Therefore, Boulinas' current account balance is $50 billion - $200 billion + (-$100 billion) = -$150 billion.

Question 11

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 12

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 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

The capital account balance is equal to the difference between purchases of foreign assets and foreign purchases of domestic assets. In this case, Jaffe's purchases of foreign assets are $200 billion and foreign purchases of Jaffe's assets are $100 billion, so the capital account balance is $200 billion - $100 billion = $100 billion.

Question 14

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 15

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 calculated by subtracting the trade deficit from the foreign purchase of assets. Cavland has a trade deficit of $100 billion ($500 billion imports - $400 billion exports), and foreigners purchased $200 billion worth of assets, resulting in a capital account balance of $100 billion ($200 billion - $100 billion).

Question 16

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 formula for calculating a country's balance of payments is: exports minus purchases of foreign assets plus foreign purchases of domestic assets. 
Therefore, we can solve for exports: 
Exports = purchases of foreign assets - foreign purchases of domestic assets 
Exports = $200 billion - $100 billion 
Exports = $100 billion. 
Therefore, the best choice is C ($150 billion is not a correct answer based on the given information, and B is incorrect because it is not a valid answer choice formatting).

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

The current account balance is equal to exports minus imports plus net income from assets abroad. In this case, exports ($950 billion) minus imports ($1,000 billion) gives a deficit of $50 billion. However, purchases of foreign assets by Grovner's citizens ($900 billion) must be subtracted to get the final current account balance of a surplus of $50 billion (B).

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 capital account?

Accepted Answer

The balance on the capital account is calculated as the difference between foreign purchases of domestic assets and domestic purchases 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 surplus.

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

To find the value of Grovner's assets purchased by foreigners, we need to use the balance of payments equation:
Current Account + Capital Account = 0
or
Exports - Imports + Net Income from Abroad + Net Current Transfers to Abroad + Capital Account Transactions = 0
Since purchases of foreign assets by its citizens are part of the capital account, we can find the value of assets purchased by foreigners as:
Assets purchased by foreigners = (Exports - Imports) + (Net Income from Abroad + Net Current Transfers to Abroad) - (Purchases of foreign assets by Grovner's citizens)
Assets purchased by foreigners = ($950 billion - $1,000 billion) + 0 - $900 billion
Assets purchased by foreigners = -$50 billion
However, since the question asks for the value of assets purchased by foreigners (and not their net purchase), we take the absolute value, which is $50 billion. Therefore, the answer is C) $850 billion.

Question 20

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...

Quiz 15: Net Exports and International Finance

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

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 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 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 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 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 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 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 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 the value of Townsends' 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 Salvania's balance in Its capital 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 Jaffe's balance on 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 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 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 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 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 the value of Grovner's Assets purchased by foreigners?

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?