Question 1

A country has a financial account surplus if the balance on the:

Accepted Answer

A financial account surplus occurs when the balance on the financial account is positive, indicating that the country is receiving more investment from abroad than it is sending out.

Question 2

Money flows into the United States from other countries as a result of:

Accepted Answer

Money flows into the United States from other countries as a result of transfer payments from foreign sources to U.S. residents. These can include remittances from individuals working abroad to their families in the U.S., foreign aid, or other transfers not associated with the purchase of goods or services.

Question 3

A Peruvian financial investor purchases a sporting goods store in Colorado Springs. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

Accepted Answer

The purchase of a sporting goods store in Colorado Springs by a Peruvian financial investor would involve the transfer of ownership of a financial asset, which falls under the financial account of U.S. international transactions. Since the transaction involves a payment made by a foreigner (Peruvian investor) to a U.S. resident (seller of the sporting goods store), it would be entered as a payment from foreigners in the financial account.

Question 4

A deficit in the current account means there will be:

Accepted Answer

A deficit in the current account generally leads to a surplus in the financial account, as countries with current account deficits often finance these deficits by borrowing from abroad or selling domestic assets to foreign investors, which are recorded in the financial account.

Question 5

Money flows into the United States from other countries as a direct result of:

Accepted Answer

Foreign countries buying goods and services from the US creates an inflow of money into the US economy. This is known as exports and contributes to the balance of payments.

Question 6

A surplus in the current account means there will be:

Accepted Answer

The answer of A surplus in the current account means...

Question 7

A current account surplus occurs when:

Accepted Answer

A current account surplus occurs when a country's balance on the current account is positive, meaning that their exports exceed their imports and they are receiving more money from abroad than they are spending. Options B, C, and D all describe situations where a country would have a current account deficit.

Question 8

When there is a deficit in the U.S. balance of payments on the current account, we pay for the difference by:

Accepted Answer

When there is a deficit in the U.S. balance of payments on the current account, we need to pay for the difference by borrowing or selling assets to other countries. This helps to increase the supply of U.S. dollars, which reduces the value of the currency relative to other currencies, making U.S. exports cheaper and imports more expensive.

Question 9

A family from New York City eats in a restaurant in Mexico City. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

Accepted Answer

The transaction of the family from New York City eating in a restaurant in Mexico City would appear in the current account of U.S. international transactions since it involves the exchange of goods and services between residents of different countries. It would also be entered as a payment to foreigners since the family is paying for the services provided by the restaurant in Mexico City.

Question 10

The balance between spending flowing into a country from other countries and spending flowing out of that country to other countries is the:

Accepted Answer

The balance between spending flowing into a country from other countries and spending flowing out of that country to other countries is known as the balance of payments. This includes all financial transactions between individuals, businesses, and governments of one country with those of another country. The other options - singular account, euro-dollar account, and universal exchange account are not correct terms used to describe the balance of payments.

Question 11

A country has a capital account deficit if the balance on the:

Accepted Answer

The answer of A country has a capital account deficit...

Question 12

A current account deficit exists when:

Accepted Answer

A current account deficit exists when the balance on the current account is negative, meaning that a country is spending more on imports, foreign aid or investments abroad than it is receiving through exports, remittances or foreign investments.

Question 13

A current account deficit is generally a result of:

Accepted Answer

A current account deficit occurs when the value of imports exceeds the value of exports. This means that a country is spending more on foreign goods and services than it is earning from selling its own goods and services abroad.

Question 14

If a country has a positive balance of payments on the current account, then it must:

Accepted Answer

A positive balance of payments on the current account indicates that a country is exporting more than it is importing, leading to a surplus. To balance this, the financial account (which includes investments, loans, and banking transactions) typically moves in the opposite direction, showing a deficit as the country invests abroad or reduces foreign investments in the domestic economy.

Question 15

A family from Peru eats in a restaurant in Salt Lake City. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

Accepted Answer

This transaction involves a family from Peru purchasing a service (eating at a restaurant) in the United States, which falls under the category of "current account" in the U.S. international transactions. The payment is made from foreigners (the family from Peru) to a domestic entity (the restaurant in Salt Lake City), so it would be entered as a payment "from" foreigners in the current account.

Question 16

In 2010, the $471 billion deficit on the U.S. current account was offset by a surplus of $255 billion on financial account. This difference is the result of a:

Accepted Answer

The surplus on the financial account should theoretically equal to the deficit on the current account due to the principle of balance of payments accounting. However, due to various reasons such as incomplete data or error in measurement, the actual numbers may not match. This difference is known as the statistical discrepancy.

Question 17

A _____ balance on the financial account means a _____.

Accepted Answer

A positive balance on the financial account means that a country has a surplus of foreign assets, such as investments, loans, and deposits. This indicates that the country is receiving more income from its assets than it is paying out to foreign investors. Therefore, a positive financial account balance is consistent with a financial account surplus.

Question 18

A financial investor from Los Angeles purchases bonds issued by the government of Peru. In the accounting for U.S. international transactions, this transaction would appear in the _____, and it would be entered as a payment _____ foreigners.

Accepted Answer

This transaction involves the purchase of foreign assets (bonds issued by the government of Peru) by a U.S. resident, which is recorded in the financial account of the U.S. balance of payments. It is entered as a payment to foreigners because the U.S. investor is sending money abroad to purchase the bonds.

Question 19

A statement of spending that flows into and out of the country for purchases of assets during a particular period is the nation's:

Accepted Answer

The financial account in a country's balance of payments records the purchases and sales of financial assets that flow into and out of the country. This includes investments in foreign stocks, bonds, and real estate, distinguishing it from the current account, which deals with trade in goods and services, income, and current transfers.

Question 20

A current account surplus is generally a result of:

Accepted Answer

A current account surplus means that a country's exports exceed its imports, leading to a positive balance of trade. Therefore, the correct answer is D - exports exceeding imports.

Quiz 31: Open-Economy Macroeconomics