Question 1

If the current account is in deficit,imports of goods and services exceed exports of goods and services (plus net unilateral transfers).

Accepted Answer

A current account deficit means that a country is importing more goods and services than it is exporting, leading to a negative balance in the current account. This deficit can be financed by borrowing from foreign sources or drawing down reserves.

Question 2

The balance of payments summarizes the transactions that occur during a given time period between

Accepted Answer

The balance of payments records all the transactions between the residents of one country and the rest of the world, including individuals, firms, and governments. Thus, option C is the best choice. Option A is incorrect because it refers only to transactions between two governments. Option B is incorrect because it refers only to transactions between different levels of government within the same country. Option D is too narrow as it refers only to transactions between two whole countries, while option E is too specific as it refers only to non-government residents.

Question 3

The balance of payments measures a flow of economic transactions during a particular period,usually a year.

Accepted Answer

The balance of payments measures the flow of economic transactions between a country and the rest of the world during a specific period, usually one year.

Question 4

Which of the following is not true about the U.S.trade balance since 1979?

Accepted Answer

The statement "The balance of trade has been in surplus" is not true since 1979. The U.S. has consistently had a trade deficit since that time period, meaning that imports exceed exports.

Question 5

The merchandise trade balance does not include

Accepted Answer

Shipping and insurance costs are not included in the merchandise trade balance.

Question 6

The trade balance is

Accepted Answer

The trade balance is calculated as the difference between the value of a country's merchandise exports and merchandise imports in a given period of time. Therefore, option B is the correct choice. Option A is incorrect because it includes both merchandise and service balances as well as the capital account balance. Option C is incorrect because it only includes the current account balance and the capital account balance, but not the merchandise trade balance. Option D is incorrect because it refers to the balance of payments, which includes both the current account and the capital account, but not just the trade balance. Option E is incorrect because it refers to the services balance and the capital account balance, but not the merchandise trade balance.

Question 7

The balance of goods and services is

Accepted Answer

The answer of The balance of goods and services is
...

Question 8

The merchandise trade balance measures

Accepted Answer

The answer of The merchandise trade balance measures
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Question 9

A nation's merchandise trade balance reflects

Accepted Answer

A nation's merchandise trade balance only reflects the trade of tangible products or goods, such as raw materials, machinery, and finished goods. It does not include intangible services, such as financial services, tourism, and intellectual property rights.

Question 10

A nation has an unfavorable balance of trade when

Accepted Answer

An unfavorable balance of trade occurs when the value of a nation's imports of goods is greater than the value of its exports of goods. This leads to a deficit in the balance of payments, as the nation is spending more money on imports than it is earning from exports. A surplus in the balance of payments (choice A) is actually a desirable outcome, as it means the nation is earning more from exports than it is spending on imports. The current account and capital account (choice D) are two components of the balance of payments, and a surplus in the current account and deficit in the capital account could offset each other. Finally, high tariffs (choice E) could be a factor in a nation's balance of trade, but they are not the only factor and do not necessarily lead to an unfavorable balance.

Question 11

The balance of payments can be thought of as the balance of economic transactions.

Accepted Answer

The balance of payments includes all economic transactions between a country and the rest of the world, including trade in goods and services, financial flows, and transfers. Therefore, it can be seen as the balance of economic transactions.

Question 12

Which of the following is not classified as a service in the current account?

Accepted Answer

The answer of Which of the following is not classified...

Question 13

In the United States,imports have exceeded exports in every year since 1979.

Accepted Answer

According to data from the U.S. Census Bureau, the United States has had a trade deficit (imports exceeding exports) every year since 1979.

Question 14

Because of the accounting techniques used,the balance of payments shows that debits equal credits only if exports equal imports.

Accepted Answer

The balance of payments actually shows that credits equal debits, regardless of whether exports equal imports. The accounting techniques used ensure that all international transactions are accounted for and that the balance of payments remains in equilibrium.

Question 15

The merchandise trade balance

Accepted Answer

The merchandise trade balance measures the trade of tangible products between countries. It is calculated by subtracting the value of tangible products imported from the value of tangible products exported. Choices A, B, and C are not included in the merchandise trade balance.

Question 16

The balance of payments always balances,because each of the specific accounts must,by definition,be in balance.

Accepted Answer

The answer of The balance of payments always balances,because each...

Question 17

Which of the following events would not be recorded in the U.S.balance of payments?

Accepted Answer

The money supply of a foreign nation increasing does not involve any transaction with the United States and therefore would not be recorded in the U.S. balance of payments.

Question 18

The value of U.S.merchandise exports is a debit in the U.S.balance-of-payments account.

Accepted Answer

The value of U.S. merchandise exports is a credit, not a debit, in the U.S. balance-of-payments account. This is because exports represent an inflow of foreign currency into the U.S. economy.

Question 19

Which of the following is not considered as a unilateral transfer?

Accepted Answer

Income earned from foreign investments is not considered a unilateral transfer because it involves a quid pro quo exchange and is therefore a transaction rather than a gift. Unilateral transfers are gifts or donations made without the expectation of receiving anything in return. Foreign aid, personal gifts, institutional charitable donations, and government transfers are all examples of unilateral transfers.

Question 20

The value of a country's exports is listed in its balance of payments account as a(n)

Accepted Answer

The value of a country's exports is regarded as a credit item in its balance of payments account since it contributes to an inflow of foreign currency into the country.

Quiz 20: International Finance