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

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 2

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

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

Question 3

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 issued...

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 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 5

Suppose a family from Peru eats in a restaurant in Salt Lake City, Utah.How will this Transaction be recorded in U.S.international transactions?

Accepted Answer

The transaction is recorded in the current account as a positive (plus) item because it represents an inflow of foreign currency into the United States.

Question 6

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 7

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 the difference between exports and imports, which in this case is $400 billion - $500 billion = -$100 billion (negative because imports exceed exports). However, the purchase of assets by foreigners falls under the capital account, and does not affect the current account balance. Therefore, the current account balance remains at -$100 billion. The closest choice to this answer is B, which represents the same value but in a different format.

Question 8

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 9

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

Using the balance of payments equation, Current Account Balance + Capital Account Balance = 0, we can calculate the value of Townsend's assets purchased by foreigners as follows:

Current Account Balance = Exports - Imports = $1,000 billion - $950 billion = $50 billion 
Capital Account Balance = Purchases of foreign assets by citizens = $900 billion

Therefore, Capital Account Balance + Current Account Balance = $900 billion + $50 billion = $950 billion (which is the opposite sign of capital outflow)

To get the value of Townsend's assets purchased by foreigners, we need to rearrange the equation to get:

Capital Account Balance = -$950 billion - -$50 billion = -$900 billion

Since Capital Account Balance represents the net purchase of assets by foreigners in Townsend, the value of Townsend's assets purchased by foreigners is $900 billion. Therefore, the best choice is C.

Question 10

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 as the difference between foreign purchases of assets in Cavland and Cavland's investments abroad. Since the question does not provide information on Cavland's investments abroad, we can assume it to be zero. Therefore, the balance on the capital account would be equal to the foreign purchases of assets in Cavland, which is $200 billion. However, since the capital account has a negative sign convention, the balance would be -$200 billion. To convert this to a positive number, we would take the absolute value, which is $200 billion. Therefore, Cavland's balance on its capital account would be $100 billion, which is half of the foreign purchases of assets.

Question 11

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

Accepted Answer

Since exports ($500 billion) are greater than imports ($400 billion), Salvania has a trade surplus of $100 billion. Foreigners purchased $200 billion worth of assets in Salvania, so the value of foreign assets purchased by the citizens of Salvania is the trade surplus ($100 billion) plus the amount foreigners spent in purchasing assets ($200 billion), which equals $300 billion. Therefore, the correct choice is C.

Question 13

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 14

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 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 the value of Grovner's Assets purchased by foreigners?

Accepted Answer

The value of Grovner's assets purchased by foreigners can be found by calculating the current account balance, which is equal to exports minus imports plus net foreign investment.

Current account balance = $950B - $1,000B + $900B = -$50B

Since the current account balance is negative, it means that Grovner is borrowing from the rest of the world and its assets purchased by foreigners are equal to the absolute value of the current account balance, which is $50 billion. Therefore, the correct answer is C.

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 the value of Boulinas' imports?

Accepted Answer

The formula for measuring the current account balance is:

Current account balance = Exports – Imports + Foreign purchases of domestic assets – Domestic purchases of foreign assets

By rearranging this formula, we can solve for imports:

Imports = Exports + Foreign purchases of domestic assets – Domestic purchases of foreign assets – Current account balance

Plugging in the given values, we get:

Imports = $50 billion + $200 billion - $100 billion - Current account balance

We do not know the value of the current account balance, but we do know that Boulinas has a larger value of foreign purchases of domestic assets compared to domestic purchases of foreign assets. This means that the current account balance is likely positive, meaning that Boulinas has a surplus in its current account.

Therefore, the value of imports must be less than the combined total of exports and foreign purchases of domestic assets. The only answer choice that reflects this is C, $150 billion.

Question 17

Suppose an American family from New York City eats in a restaurant in Mexico City.How Will this transaction be recorded in U.S.international transactions?

Accepted Answer

The transaction of an American family from New York City eating in a restaurant in Mexico City would be recorded in the current account as a negative (minus) item because it represents an outflow of money from the United States to Mexico. The current account includes all transactions related to imports and exports of goods and services, as well as income from investments and transfers between countries. In this case, the American family is consuming a service (restaurant meals) in Mexico, which is considered an import of services for the United States and a negative item in the current account.

Question 18

Suppose a Peruvian financial investor purchases a sporting goods store in Colorado Springs, Colorado.How will this transaction be recorded in U.S.international transactions?

Accepted Answer

This transaction is recorded in the capital account as a positive item because it involves foreign direct investment into the United States, which is a capital inflow.

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 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...

Quiz 30: 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 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?

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 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 a family from Peru eats in a restaurant in Salt Lake City, Utah.How will this Transaction be recorded in U.S.international transactions?

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 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 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 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 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 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 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 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 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 an American family from New York City eats in a restaurant in Mexico City.How Will this transaction be recorded in U.S.international transactions?

Suppose a Peruvian financial investor purchases a sporting goods store in Colorado Springs, Colorado.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 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?