AP Macro International Review

The term __________ is used to describe what those in one country buy from those in other countries.

• A. exports
• B. imports
• C. trade
• D. surplus

From an economic perspective, returns on foreign investment are included in the overall measure of trade because financial investments:

• A. are a form of trade that takes place in the financial capital market.
• B. can also be thought of as payments made by the government.
• C. are made by parties in the U.S. economy and foreign investors. 
• D. have expanded substantially in the U.S. over the last few decades.

Which of the following would most likely be included in the negative side of the current account balance?

• A. money earned by Canadian firms in the U.S.
• B. money spent by Canadian tourists in the U.S.
• C. returns paid to U.S. investors in Southeast Asia
• D. European aid sent to the U.S. to fund the Iraq war

In 2010, the country of Vesey exported goods worth $312 billion and services worth $198 billion. It imported goods worth $525 billion and services worth $255 billion. It sent $1.2 billion in famine relief to Africa, and received $3 billion to support its first democratic election efforts.  What was the current account balance in Vesey for 2010? Only one of the following statements about trade surplus and capital flow is correct. Which one is it?

• A. $251.2 billion
• B. $270.6 billion
• C. $213.3 billion
• D. $271.8 billion

Only one of the following statements about trade surplus and capital flow is correct. Which one is it?

• A. a trade surplus means that there is a net inflow of capital
• B. a trade surplus means that there is a net outflow of capital
• C. a trade surplus exists if there is a net inflow of capital excluding foreign borrowing and lending
• D. a trade surplus exists if there is a net outflow of capital excluding foreign borrowing and lending

Which of the following represents a financial inflow to the U.S. economy?

• A. returns paid on U.S. financial investments in Switzerland
• B. computer chip imports from Israel
• C. oil imports from Canada
• D. foreign aid from the U.S. to Ethiopia

A recession tends to make a _____________________.

• A. trade surplus smaller
• B. trade deficit smaller
• C. trade deficit larger
• D. both a and b above

Under what circumstances would it most likely be considered beneficial for a government to be a large borrower of foreign investment capital? 

• A. never as there is no economic merit in a policy of running trade deficits
• B. if the inflow of capital is absorbed by greater government borrowing
• C. when borrowing larger amounts is based on unconventional macroeconomic wisdom
• D. when those funds are invested in a way that sustains economic growth over time

When Mataeo buys Euros through _________________________, he will use his U.S. dollars to pay for them.

• A. the foreign exchange market
• B. the currency exchange market
• C. a floating exchange market
• D. foreign currency market

A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies.

• A. strengthening; more
• B. weakening; less
• C. a problem for exporters; less
• D. beneficial to importers; more