The Balance Of Payments MCQs

Option A: If the current accounts is in surplus then the capital account must also be in surplus

Option B: If the current account is in deficit then the capital account must also be in deficit

Option C: The overall sum of all the entries in the balance of payments must be positive

Option D: The overall sum of all entries in the balance of payments must be zero

Correct Answer: The overall sum of all entries in the balance of payments must be zero ✔

Option A: balance of payments

Option B: capital account

Option C: current account

Option D: balance of trade

Correct Answer: balance of trade ✔

Option A: credit transactions

Option B: debit transactions

Option C: unilateral transfers

Option D: statistical discrepancy

Correct Answer: statistical discrepancy ✔

Option A: exports and imports of financial assets

Option B: the current account plus capital account

Option C: the net export of goods and services

Option D: the value of merchandise exports minus imports

Correct Answer: the value of merchandise exports minus imports ✔

Option A: trade deficit and an excess of investment over domestic saving

Option B: trade surplus and an excess of investment over domestic saving

Option C: trade deficits and an excess of domestic savings over investment

Option D: trade surpluses and an excess of domestic saving over investment

Correct Answer: trade deficit and an excess of investment over domestic saving ✔

Option A: purchases more stocks and bonds from the rest of the world than it sells

Option B: purchases more goods from the rest of the world than it sells

Option C: sells more goods to the rest of the world than it purchases

Option D: sells more stocks and bonds to the rest of the world than it purchases

Correct Answer: purchases more goods from the rest of the world than it sells ✔

Option A: the country is a net lender to the rest of the world

Option B: the country is running a net capital account surplus

Option C: foreign investment in domestic securities is at very low levels

Option D: All of the above

Correct Answer: the country is a net lender to the rest of the world ✔

Option A: lending more money to other nations

Option B: experiencing a surplus in exports of goods an services

Option C: reducing its indebtedness to other nations

Option D: going further into debt with other nations

Correct Answer: going further into debt with other nations ✔

Option A: is equal to official reserve transactions

Option B: occurs because of foreign exchange fluctuations

Option C: reflects statistical discrepancies

Option D: reflects the difference between flow and stock concepts

Correct Answer: reflects the difference between flow and stock concepts ✔

Option A: unilateral transfers

Option B: capital account

Option C: merchandise account

Option D: services account

Correct Answer: services account ✔

Option A: the U.S Department of labor

Option B: the U.S Department of Agriculture

Option C: the U.S Department of commerce

Option D: the council of Economic Advisers to the President

Correct Answer: the U.S Department of commerce ✔

Option A: merchandise trade flows

Option B: services flows

Option C: current account flows

Option D: capital flows

Correct Answer: capital flows ✔

Option A: capital outflows

Option B: merchandise exports

Option C: private gifts to foreigners

Option D: foreign aid granted to other nations

Correct Answer: merchandise exports ✔

Option A: balance of international indebtedness

Option B: balance of financial transactions

Option C: balance of payments

Option D: income statements

Correct Answer: balance of payments ✔

Option A: merchandise imports equal merchandise exports

Option B: capital imports equal capital exports

Option C: services exports equal services imports

Option D: the total surplus or deficit equals zero

Correct Answer: the total surplus or deficit equals zero ✔

Option A: involves receipts from foreigners

Option B: involves payments to foreigners

Option C: increases the domestic money supply

Option D: decreases the demand for foreign exchange

Correct Answer: involves receipts from foreigners ✔

Option A: exporter

Option B: importer

Option C: debtor

Option D: creditor

Correct Answer: debtor ✔

Option A: statistical discrepancy

Option B: balance of payments

Option C: balance of trade

Option D: trade deficit

Correct Answer: statistical discrepancy ✔

Option A: The overall sum of all the entries in the balance of payments must be positive

Option B: A country runs a current account surplus if it sells more of its assets abroad than it buys abroad

Option C: A country runs a capital account deficit if it imports more than it exports

Option D: If the current account is in surplus the capital account must be in deficit

Correct Answer: If the current account is in surplus the capital account must be in deficit ✔

Option A: current account the capital account

Option B: current account the trade account

Option C: trade account the capital account

Option D: current account the reserve account

Correct Answer: current account the capital account ✔

Option A: balance of trade

Option B: capital account

Option C: current account

Option D: balance of payments

Correct Answer: balance of payments ✔

Option A: capital account transactions

Option B: current account transactions

Option C: unilateral transfer transactions

Option D: merchandise trade transactions

Correct Answer: capital account transactions ✔

Option A: is true by definition in all possible circumstances

Option B: is supported by recent U.S history

Option C: focuses only on the overall economy and is thus always true

Option D: fails to recognize that a current account deficit is matched by an equal inflow of foreign funds which finances employment increasing investment spending

Correct Answer: fails to recognize that a current account deficit is matched by an equal inflow of foreign funds which finances employment increasing investment spending ✔

Option A: merchandise trade account

Option B: services account

Option C: unilateral transfers account

Option D: capital account

Correct Answer: services account ✔

Option A: a credit item in the current account

Option B: a debit item in the capital account

Option C: a credit item in the capital account

Option D: a debit item in the current account

Correct Answer: a credit item in the capital account ✔

Option A: the sum of merchandise trade and services

Option B: the current account plus long-term capital

Option C: the value of merchandise exports minus imports

Option D: short-term capital plus the basic balance

Correct Answer: the sum of merchandise trade and services ✔

Option A: engage in more government spending

Option B: reduce government taxes

Option C: increases private investment spending

Option D: decrease domestic consumption

Correct Answer: decrease domestic consumption ✔

Option A: merchandise trade deficits

Option B: merchandise trade surpluses

Option C: capital/financial account surpluses

Option D: capital/financial account deficits

Correct Answer: capital/financial account surpluses ✔

Option A: mean a loss of foreign exchange

Option B: bring foreign exchange into the country

Option C: indicate a surplus exist

Option D: exist at the bottom line after all accounts are totaled

Correct Answer: mean a loss of foreign exchange ✔

Option A: the value of trade in merchandise

Option B: services

Option C: unilateral transfers

Option D: All of the above

Correct Answer: All of the above ✔

Option A: capital outflow would cause the nation’s currency to depreciate contributing to a trade deficit

Option B: capital inflow would cause the nation’s currency to depreciate contributing to a trade deficit

Option C: capital inflow would cause the nation’s currency to appreciate contributing to a trade deficit

Option D: capital outflow would cause the nation’s currency to appreciate contributing to a trade deficit

Correct Answer: C. capital inflow would cause the nation’s currency to appreciate contributing to a trade deficit ✔

Option A: investment inflows

Option B: merchandise exports

Option C: payments for American services to foreigners

Option D: private gives to foreign residents

Correct Answer: private gives to foreign residents ✔

Option A: insure that the sum of all debits matches the sum of all credits

Option B: insure that trade imports equals the value of trade exports

Option C: obtain an accurate account of a balance of payments deficit

Option D: obtain an accurate account of a balance of payments surplus

Correct Answer: insure that the sum of all debits matches the sum of all credits ✔

Option A: involves receipts from foreigners

Option B: involves payments to foreigners

Option C: increases the domestic money supply

Option D: decreases the demand for foreign exchange

Correct Answer: involves payments to foreigners ✔

Option A: larger savings pool available to finance domestic spending

Option B: higher interest rate which leads to lower domestic investment

Option C: loss of funds to trading partners overseas

Option D: decrease in its services exports to other countries

Correct Answer: larger savings pool available to finance domestic spending ✔

Option A: debtor

Option B: creditor

Option C: spender

Option D: exporter

Correct Answer: creditor ✔