CHAPTER 8 BOP

Multiple Choice

The definition of TRADE is __________________.

• Importing goods
• to buy or sell goods or services
• Exporting goods

Multiple Choice

Products brought into a country

• Currency
• Exchange rate
• Export
• Import

Multiple Choice

Products sold to other countries

• Currency
• Import
• Export
• International trade

Multiple Choice

Which of the following is the balance of payments?

• a record of international payments over the course of a year.

• increase in the general price level

• the amount of unemployed workers receiving benefits

• when imports> exports

Multiple Choice

Which of the following is NOT a component of the Malaysian Balance of Payments?

• Current Account

• Capital and Financial Account

• Official Reserve Account

• Savings Account

Fill in the Blanks

The formula for calculating merchandise trade balance is Value of export minus value of

.

Multiple Choice

The table gives the values of selected accounts in a nation’s balance of payments in millions of dollars. Based on it, the nation’s trade balance is equal to which of the following?

• −$130 million

• -$100 million

• $100 million

• $770 million

• $900 million

Open Ended

Give two examples of services recorded in the Balance of Payments (BOP).

Multiple Choice

Which of the following is an example of a current transfer in the current account?

• Military aid given by the government to another country

• Purchase of foreign assets by Malaysians

• Direct investment abroad

• Portfolio investment

Multiple Select

Which of the following are components of the current account?

• Merchandise trade balance

• Service balance

• Net income

• Capital transfers

Fill in the Blanks

The balance on current account is the sum of trade balance, service balance, net income, and

.

Multiple Choice

Which of the following best describes the function of the capital account?

• Records payment flows and purchases of foreign assets by Malaysians or Malaysian assets by foreigners

• Records all current transfers

• Records the purchase of shares or bonds

• Records only government transactions

Multiple Select

Which of the following items are recorded under the capital account?

• Long term capital

• Capital transfer

• Non-financial asset

• Portfolio investment

Multiple Choice

Leroy Jenkins buys stock in a Japanese video game company. This transaction would be recorded on balance of payments as ...........................

• current account

• financial/capital account

• official reserves

Multiple Choice

External commercial borrowing comes under the category of

• current account

• capital account

• Reserve account

• saving account

Multiple Select

Which of the following are ways to finance a deficit (when Export < Import) in the Balance of Payments?

• Borrow locally

• Sell an asset locally/overseas

• Pay outstanding debts

• Borrow from international financial institutions

Multiple Select

Which of the following are ways to finance a surplus (when Export > Import) in the Balance of Payments?

• Invest the surplus

• Increase official gold and foreign currency reserves

• Borrow locally

• Pay outstanding debts

Open Ended

List two measures that can be used to correct disequilibrium in the balance of payments.