Question 1

Balance of payment (BOP)data may be important for any of the following reasons:

Accepted Answer

All of the given options are valid reasons why BOP data might be important. Option A implies that the BOP can help predict a country's market potential, especially in the short term. Option B suggests that the BOP is an essential indicator of foreign exchange rates, and option C implies that changes in a country's BOP may signify a shift in controls over dividend and interest payments.

Question 2

According to the authors,the following types of transactions dominate the balance of payments:

Accepted Answer

D

Question 3

Which of the following is NOT an example of an exchange of financial assets?

Accepted Answer

The exchange of travel services involves the exchange of a non-financial asset (a service), rather than a financial asset. The other options (stocks, bonds, loans) all involve the exchange of financial assets.

Question 4

The travel services provided to international travelers by United Airlines would be recorded in the current account subcategory of ________.

Accepted Answer

The current account includes international trade in services, such as travel services provided by United Airlines to international travelers. Therefore, the services trade subcategory is the best fit for this transaction. Income trade refers to income earned by individuals or companies from foreign investment, goods trade refers to the import and export of physical goods, and current transfers refer to unilateral transfers of assets or income between countries, such as foreign aid or remittances.

Question 5

Expenditures by U.S.tourists in foreign countries for foreign goods or services are factored into BOP calculations.

Accepted Answer

Expenditures by U.S. tourists in foreign countries for foreign goods or services are considered as outflows of funds from the U.S. and are factored into the Balance of Payments (BOP) calculations. This helps in understanding the overall balance of payments position of a country, which is the difference between the inflows and outflows of funds in a given time period.

Question 6

A country experiencing a serious BOP ________ is more likely to ________ exports than otherwise.

Accepted Answer

The answer of A country experiencing a serious BOP ________...

Question 7

Two types of business transactions dominate the balance of payments.Which of the following is NOT such a transaction?

Accepted Answer

Political contributions are not considered business transactions in the balance of payments. The other options involve the exchange of real assets, goods and services, and financial transactions that are recorded in the balance of payments.

Question 8

Assume Anaconda Copper Inc.created a subsidiary in Chile last year to mine copper ore.The proportion of net income paid back to the parent company as a dividend would be recorded in the current account subcategory of ________.

Accepted Answer

The proportion of net income paid back to the parent company from a subsidiary in another country would be considered "income trade" and recorded in the current account subcategory of income trade.

Question 9

The BOP must be in balance but the current account need not be.

Accepted Answer

The BOP (Balance of Payments) is a comprehensive statement that includes the current account, capital account, and financial account. The BOP must be in balance, meaning that the sum of all transactions (inflows and outflows) must be equal, but the current account is a sub-account of the BOP and does not necessarily need to be in balance on its own. However, excessive deficits in the current account can lead to imbalances in the other sub-accounts of the BOP, which can ultimately affect the overall balance.

Question 10

The balance of payments is most like a(an)________.

Accepted Answer

The balance of payments is a statement that summarizes all the economic transactions between a country and the rest of the world over a specific period, similar to a cash flow statement, which tracks the inflow and outflow of cash in a business. Therefore, the most appropriate choice is A, cash flow statement.

Question 11

Which of the following is NOT a part of the Current Account of BOP?

Accepted Answer

Net portfolio investment is a part of the Capital and Financial Account of the Balance of Payments (BOP). The Current Account includes the net export/import of goods, balance of trade, and net export/import of services.

Question 12

The subcategory that typically dominates the current account is ________.

Accepted Answer

Goods (merchandise) trade typically dominates the current account. This includes imports and exports of physical goods such as cars, machinery, and consumer products. Services trade, income trade, and transfer accounts are also important components of the current account but generally do not have as large an impact as goods trade.

Question 13

The authors identify a tip for understanding BOP accounting.They recommend that you "follow the cash flow."

Accepted Answer

Following the cash flow is a tip provided by the authors to understand BOP accounting in their article.

Question 14

Which of the following is NOT an item to be considered in BOP calculations?

Accepted Answer

The answer of Which of the following is NOT an...

Question 15

If your company were to import and export textiles,the transactions would be recorded in the current account subcategory of ________.

Accepted Answer

The current account records transactions for goods and services, which includes imports and exports of textiles. The other subcategories, such as income trade and current transfers, do not pertain to the import and export of textiles.

Question 16

Which of the following could be considered a typical BOP transaction?

Accepted Answer

All the transactions involve cross-border financial exchanges, which are recorded in the Balance of Payments (BOP).

Question 17

Which of the following would NOT be considered a typical BOP transaction?

Accepted Answer

The answer of Which of the following would NOT be...

Question 18

The balance of payments as applied to a course in international finance may be defined as

Accepted Answer

The balance of payments measures all international economic transactions between the residents of a country and foreign residents. This includes all goods, services, and financial transactions, as well as transfers of gifts or aid between countries. It is important to keep track of a country's balance of payments as it can indicate the health of a country's economy and its relationship with other countries. Choices A, B, and D are incorrect because they do not accurately define the balance of payments.

Question 19

Which of the following is NOT part of the balance of payments account?

Accepted Answer

All three options listed (current account, financial/capital account, and official reserves account) are part of the balance of payments account. Therefore, D is the correct answer as it states that all of the above are BOP accounts.

Question 20

The ________ includes all international economic transactions with income or payment flows occurring within the year.

Accepted Answer

The current account includes all international economic transactions with income or payment flows occurring within the year, such as trade in goods and services, income from investments, and unilateral transfers. The capital account includes capital transfers and the acquisition or disposal of non-produced, non-financial assets. The financial account includes transactions in financial assets and liabilities, such as foreign direct investment, portfolio investment, and other investment. The IMF account is a record of a country's dealings with the International Monetary Fund.

Quiz 4: The Balance of Payments

Balance of payment (BOP) data may be important for any of the following reasons: