Chapter1 balance of paymentsBalance of Payments Accounting1Balance of paymentsa)is defined as the statistical record of a country’s internationaltransactions over a certain period of time presented in the form ofa double-entry bookkeepingb)provides detailed information concerning the demand and supply of acountry’s currencyc)can be used to evaluate the performance of a country in internationaleconomic competitiond)all of the aboveAnswer: d2Generally speaking, any transaction that results in a receipt from foreignersa)Will be recorded as a debit, with a negative sign, in the U.S. balanceof paymentsb)Will be recorded as a debit, with a positive sign, in the U.S. balanceof paymentsc)Will be recorded as a credit, with a negative sign, in the U.S. balanceof paymentsd)Will be recorded as a credit, with a positive sign, in the U.S. balanceof paymentsAnswer d3 Generally speaking, any transaction that results in a payment to foreignerse)Will be recorded as a debit, with a negative sign, in the U.S. balanceof paymentsf)Will be recorded as a debit, with a positive sign, in the U.S. balanceof paymentsg)Will be recorded as a credit, with a negative sign, in the U.S. balanceof paymentsh)Will be recorded as a credit, with a positive sign, in the U.S. balanceof paymentsAnswer a)4 Suppose the McDonalds Corporation imports 100 tons of Canadian beef, paying for it by transferring the funds to a New York bank account kept by the Canadian Beef Conglomerate.i)Payment by McDonalds will be recorded as a debitj)The deposit of the funds by the seller will be recorded as a debit k)Payment by McDonalds will be recorded as a creditl)The deposit of the funds by the buyer will be creditAnswer: a5Since the balance of payments is presented as a system of double-entry bookkeeping,a)Every credit in the account is balanced by a matching debitb)Every debit in the account is balanced by a matching creditc)a) and b) are both trued)None of the aboveAnswer c)6 A country’s international transactions can be grouped into thefollowing three main types:a)current account, medium term account, and long term capitalaccountb)current account, long term capital account, and official reserveaccountc)current account, capital account, and official reserve accountd)capital account, official reserve account, trade account Answer: c7Invisible trade refers to:a)services that avoid tax paymentsb)underground economyc)legal, consulting, and engineering servicesd)tourist expenditures, onlyAnswer: c8The current account is divided into four finer categories:a)Merchandise trade, services, income, and statisticaldiscrepancy.b)Merchandise trade, services, income, and unilateral transfersc)Merchandise trade, services, portfolio investment, andunilateral transfersd)Merchandise trade, services, factor income, and directinvestmentAnswer: b9Factor incomea)Consists largely of interest, dividends, and other income onforeign investments.b)Is a theoretical construct of the factors of production, land,labor, capital, and entrepreneurial ability.c)Is generally a very minor part of national income accounting,smaller than the statistical discrepancy.d)None of the aboveAnswer: aUSE THE FOLLOWING INFORMATION TO ANSWER THE NEXT TWO QUESTIONS10 The entries in the “current account”and the “capital account”, combined together, can be outlined (in alphabetic order) as:(i)- direct investment (ii)- factor income (v)- other capital(vi)- portfolio(iii)- merchandise(iv)- official transfer investment(vii)- private transfer (viii)- services11Current account includesa)(i), (ii), and (iii)b)(ii), (iii), and (vii)c)(iv), (v), and (vii)d)(i), (v), and (vi)Answer: b12Capital account includesa)(i), (ii), and (iii)b)(ii), (iii), and (vii)c)(iv), (v), and (vii)d)(i), (v), and (vi)Answer: d13The difference between Foreign Direct Investment and Portfolio Investment is that:a)Portfolio Investment mostly represents the sale and purchase offoreign financial assets such as stocks and bonds that do not involvea transfer of control.b)Foreign Direct Investment mostly represents the sale and purchase offoreign financial assets such as stocks whereas Portfolio Investmentmostly involves the sales and purchase of foreign bonds.c)Foreign direct investment is about buying land and building factories,whereas portfolio investment is about buying stocks and bonds.d)All of the aboveAnswer: a14In the latter half of the 1980s, with a strong yen, Japanese firmsa)Faced difficulty exportingb)Could better afford to acquire U.S. assets that had become lessexpensive in terms of yen.c)Financed a sharp increase in Japanese FDI in the United Statesd)All of the aboveAnswer: d15International portfolio investments have boomed in recent years, as a result ofa)A depreciating U.S. dollarb)Increased gasoline and other commodity prices.c)The general relaxation of capital controls and regulation in manycountriesd)None of the aboveAnswer: cAnswer: c)16The capital account measuresa)The sum of U.S. sales of assets to foreigners and U.S. purchases offoreign assets.b)The difference between U.S. sales of assets to foreigners and U.S.purchases of foreign assets.c)The difference between U.S. sales of manufactured goods to foreignersand U.S. purchases of foreign products.d)None of the aboveAnswer: b) page 6417When Honda, a Japanese auto maker, built a factory in Ohio,a)It was engaged in foreign direct investmentb)It was engaged in portfolio investmentc)It was engaged in a cross-border acquisitiond)None of the above.Answer: a) page 64.18The capital account may be divided into three categories:a)Cross-border mergers and acquisitions, portfolio investment, andother investmentb)Direct investment, portfolio investment, and Cross-border mergersand acquisitionsc)Direct investment, mergers and acquisitions, and other investmentd)Direct investment, portfolio investment, and other investment Answer: d)19When Nestlé, a Swiss firm, bought the American firm Carnation, it was engaged in foreign direct investment. If Nestlé had only bought anon-controlling number of shares of the firma)Nestlé would have been engaged in portfolio investmentb)Nestlé would have been engaged in a cross-border acquisitionc)It would depend if they bought the shares from an American or aCanadiand)None of the above.Answer: a)20Foreign direct investment (FDI) occursa)when an investor acquires a measure of control of a foreign businessb)when there is an acquisition, by a foreign entity in the U.S., of 10percent or more of the voting shares of a businessc)with sales and purchases of foreign stocks and bonds that do notinvolve a transfer of controld)a and bAnswer: d21Statistical discrepancy, which by definition represents errors and omissionsa)Cannot be calculated directlyb)Is calculated by taking into account the balance-of-payments identityc)Probably has some elements that are honest mistakes, it can’t all bemoney laundering and drugs.d)All of the aboveAnswer: d)22The statistical discrepancy in the balance-of-payments accountsa)Arise since recordings of payments and receipts are done at differenttimes, in different places, possibly using different methods.b)Arise since some transactions (illegal transactions?) occur “off thebooks”.c)Represents omitted and misrecorded transactions.d)All of the aboveAnswer: d)23Regarding the statistical discrepancy in the balance-of-payments accountsa)There is some evidence that financial transactions may be mainlyresponsible for the discrepancy.b)The sum of the balance on the capital account and the statisticaldiscrepancy is very close to the balance of the current account inmagnitude.c)It tends to be positive one year and negative in others, so it’s safeto ignore itd)a) and b)Answer: d)24When a country must make a net payment to foreigners because of a balance-of-payments deficit, the central bank of the countrya)Should do nothingb)Should run down its official reserve assets (e.g. gold, foreignexchanges, and SDRs)c)Should borrow anew from foreign central banks.d)b) or c) will workAnswer: d)25Continued U.S. trade deficits coupled with foreigners’ desire to diversify their currency holdings away from U.S. dollarsa)could further diminish the position of the dollar as the dominantreserve currencyb)could affect the value of U.S. dollar (e.g. through the currencydiversification decisions of Asian central banks)c)Could lend steam to the emergence of the euro as a credible reservecurrencyd)All of the aboveAnswer: d26Currently, international reserve assets are comprised ofa)gold, platinum, foreign exchanges, and special drawing rights (SDRs)b)gold, foreign exchanges, special drawing rights (SDRs), and reservepositions in the International Monetary Fund (IMF)c)gold, diamonds, foreign exchanges, and special drawing rights (SDRs)d)reserve positions in the International Monetary Fund (IMF), only Answer: b27International reserve assets include “foreign exchanges”. These area)Special Drawing Rights (SDRs) at the IMFb)reserve positions in the International Monetary Fund (IMF)c)Foreign currency held by a country’s central bankd)None of the aboveAnswer: c28The most important international reserve asset, comprising 94 percent of the total reserve assets held by IMF member countries isa)Goldb)Foreign exchangesc)Special Drawing Rights (SDRs)d)Reserve positions in the International Monetary Fund (IMF) Answer: b29The vast majority of the foreign-exchange reserves held by central banks are denominated ina)Local currenciesb)U.S. dollarsc)Yend)EuroAnswer: b30The U.S. Trade Deficita)Is a capital account surplusb)Is a current account deficitc)Is both a capital account surplus and a current account deficitd)None of the aboveAnswer: c31Over the last several years the U.S. has run persistenta)Balance-of-payments deficitsb)Balance-of-payments surplusesc)Current Account deficitsd)Capital Account deficitsAnswer: c32More important than he absolute size of a country’s balance-of-payments disequilibriuma)is the nature and cause of the disequilibriumb)is whether it is a trade surplus or deficitc)is whether the local government is mercantilist or notd)Nothing is more important than he absolute size of a country’sbalance-of-payments disequilibriumAnswer: aThe Relationship between Balance of Payments and National Income Accounting For questions in this section, the notation isY = GNP = national incomeC = consumptionI = private investmentG = government spendingX = exportsM = imports33National income, or Gross National Product is given by:a)GNP = Y = C + I + G + X + Mb)GNP = Y = C + I + G + X – Mc)GNP = I = C + Y + G + X – Md)GNP = Y = C + I + X + M – GAnswer: b)34Which of the following is a true statement?a)BCA ≡ X – Mb)BKA ≡ X – Mc)BKA – BCA ≡ X – Md)BKA ≡ X – MAnswer a)35There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for governmentexpenditures. This relationship is given by BCA ≡ X – M ≡ (S – I) + (T – G). Given this, which of the following is a true statement?a)If (S – I) < 0, it implies that a country’s domestic savings isinsufficient to finance domestic investment.b) If (T –G) < 0, it implies that a country’s tax revenue is insufficientto finance government spendingc)both a) and b) are trued)none of the aboveAnswer c)36There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for governmentexpenditures. This relationship is given by BCA ≡ X – M ≡ (S – I) + (T – G). Given this, which of the following is a true statement?a)If (S – I) < 0, it implies that a country’s domestic savings isinsufficient to finance domestic investment.b) If (T –G) < 0, it implies that a country’s tax revenue is insufficientto finance government spendingc)when BCA is negative, it implies that government budget deficits an/orpart of domestic investment are being finance withforeign-controlled capitald)all of the above are trueAnswer d)37There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for governmentexpenditures. This relationship is given by BCA ≡ X – M ≡ (S – I) + (T– G). Given this, in order for a country to reduce a BCA deficit, whichof the following must occur?a)For a given level of S and I, the government budget deficit (T – G)must be reducedb)For a given level of I and (T – G), S must be increasedc)For a given level of S and (T – G), I must falld)All of the above would work to reduce a BCA deficitAnswer d)Explain how each of the following transactions will be classified and recorded in the debit and credit of the U.S. balance of payments:(1) A Japanese insurance company purchases U.S. Treasury bonds and pays outof its bank account kept in New York City.(2) A U.S. citizen consumes a meal at a restaurant in Paris and pays withher American Express card.(3) A Indian immigrant living in Los Angeles sends a check drawn on his L.A.bank account as a gift to his parents living in Bombay.(4) A U.S. computer programmer is hired by a British company forconsulting and gets paid from the U.S. bank account maintained bythe British company.In contrast to the U.S., Japan has realized continuous current account surpluses. What could be the main causes for these surpluses? Is it desirableto have continuous current account surpluses?欢迎您的下载，资料仅供参考！致力为企业和个人提供合同协议，策划案计划书，学习资料等等打造全网一站式需求。