Question 1

Based on the following information,what is the balance on the current account? Exports of goods and services = $5 billion
Imports of goods and services= $3 billion
Net income on investments = -$2 billion
Net transfers = -$2 billion
Increase in foreign holdings of assets in the United States = $4 billion
Increase in U.S.holdings of assets in foreign countries = -$1 billion

Accepted Answer

A

Question 2

Which of the following is not included in the balance of the financial account of the United States?

Accepted Answer

E

Question 3

The balance of trade is defined as

Accepted Answer

The balance of trade specifically refers to the difference between the value of a country's exports and imports of goods, not including services, which is what option C accurately describes.

Question 4

If Californians increase their purchases of Italian wine,assuming all else remains constant,this will ________ of the United States.

Accepted Answer

When Californians increase their purchases of Italian wine, it means the US is importing more from Italy. This increases the trade deficit (imports are greater than exports), which decreases the balance of trade. Net exports decrease because the value of goods exported from the US is reduced relative to the value of goods imported. This does not directly increase the current account balance or the balance of payments; instead, it negatively impacts the balance of trade, contributing to a larger trade deficit.

Question 5

Which of the following would increase net exports in the United States?

Accepted Answer

By Mexico purchasing 500 Ford F-150 pickup trucks, it would increase the exports of the United States and therefore, increase the net exports of the United States. The other options either involve imports from Mexico (option A), financial transactions (option C), or a transfer of funds from the United States to Mexico (option D), which would not directly impact the net exports of the United States.

Question 6

When the United States sends money to Indonesia to help tsunami survivors,in what account is this transaction recorded?

Accepted Answer

The current account records transactions related to the trade of goods and services and transfers of money between countries. Aid sent from one country to another would be recorded in the current account as a transfer of money. Transactions related to investments and financial flows would be recorded in the financial account, while the capital account records non-financial assets such as land and patents. The foreign exchange account is not a recognized category in international accounting.

Question 7

An economy that has interactions in trade or finance with other economies is referred to as

Accepted Answer

An economy that has interactions in trade or finance with other economies is referred to as an open economy. It means that the country allows trade, investments, and cross-border capital flows with other countries. A closed economy, on the other hand, restricts international trade and capital flows, while a trade-balanced economy refers to a situation where the value of a country's exports equals the value of its imports. Net foreign investment refers to the difference between the amount of money a country invests abroad and the amount of money foreign investors invest in the country. While net foreign investment is related to open/closed economies, it is not the best option for this question.

Question 8

An HMO hires radiology services from India to cut costs.If all else remains equal,this will

Accepted Answer

The answer of An HMO hires radiology services from India...

Question 9

An open economy is an economy that has

Accepted Answer

An open economy is one that engages in trade or financial interactions with other economies. This can include imports and exports of goods and services, as well as investments in financial markets or direct investment in physical assets like property or factories. A and only A is the best choice here as the other options listed are not specific to open economies but rather apply more generally to any economy.

Question 10

In August 2011,global revenues for McDonald's increased by 11.3 percent when measured in local currencies,but increased by only 5.4 percent when measured in dollars.The reason for this discrepancy is the value of the

Accepted Answer

The most likely reason for the discrepancy between the increase in local currency and the increase in dollars is that the U.S. dollar increased in value relative to most other currencies. This would cause the revenues measured in dollars to be lower even though the company's actual revenue increased when measured in the local currencies of the countries in which it operates.

Question 11

The balance of payments includes which three accounts?

Accepted Answer

The balance of payments includes the current account, which records transactions related to the import and export of goods and services; the financial account, which records transactions related to investment flows; and the capital account, which records transactions related to transfers of assets and liabilities.

Question 12

An increase in capital outflows from the United States will

Accepted Answer

Capital outflows refer to money leaving the United States to invest in foreign countries. This means that there is less money available to invest in United States assets, which results in a decrease in the balance on the financial account. The balance on the financial account reflects the difference between the inflows and outflows of capital for a country, so an increase in outflows leads to a decrease in the overall balance.

Question 13

The United States has a trade ________ with all its major trading partners and a trade ________ with every region of the world.

Accepted Answer

The answer of The United States has a trade ________...

Question 14

The current account does not include which of the following?

Accepted Answer

The current account includes net exports, net investment income, and net transfers, but it does not include U.S. holdings of foreign assets. This information is found in the capital and financial account, which is separate from the current account.

Question 15

Suppose the majority of the shares of Ford stock were sold to a Japanese firm.Assuming all else remains constant,this will

Accepted Answer

The answer of Suppose the majority of the shares of...

Question 16

Which of the following transactions would be included in Japan's current account?

Accepted Answer

Transactions involving the export or import of goods and services, such as an American citizen purchasing a new Toyota made in Japan, are included in a country's current account. This reflects the trade balance, which is a part of the current account. Purchases of stocks are considered financial transactions and are recorded in the financial account, not the current account.

Question 17

Which of the following would increase the current account balance of the United States?

Accepted Answer

An increase in the balance of trade, meaning more exports than imports, would increase the current account balance of the United States by bringing more money into the country from abroad.

Question 18

Although based in the United States,McDonald's is a global company with about ________ of its sales coming from outside of the United States.

Accepted Answer

According to the information given in the question, McDonald's has about two-thirds of its sales coming from outside of the United States.

Question 19

Based on the following information,what is the balance on the financial account? Exports of goods and services = $5 billion
Imports of goods and services = $3 billion
Net income on investments = -$2 billion
Net transfers = -$2 billion
Increase in foreign holdings of assets in the United States = $4 billion
Increase in U.S.holdings of assets in foreign countries = -$1 billion

Accepted Answer

The answer of Based on the following information,what is the...

Question 20

Suppose China decides to sell a vast majority of their large holdings of U.S.Treasury bonds.If you are thinking of refinancing your house,how would China's action affect your decision to refinance?

Accepted Answer

When a large holder of U.S. Treasury bonds decides to sell a significant portion of their holdings, it typically leads to a decrease in bond prices and an increase in yields (interest rates). Higher yields on Treasury bonds can lead to higher interest rates across the board, including for mortgages. Therefore, if you anticipate that interest rates will rise due to China's actions, you would want to refinance your house as soon as possible to lock in the current lower rates before they increase.

Quiz 29: Macroeconomics in an Open Economy