Pre-test - The balance of payments

Which of the following statements is true about the balance of payments account?

• Only the movement of financial assets is included in the balance of payments

• Only imports and exports are included in the balance of payments

• The sum of all credit entries is greater than the sum of all debit entries

• A surplus in the financial account means there is a deficit in the current account

• The sum of all debit entries is greater than the sum of all credit entries

Which of the following statements about the financial account is true?

• It can be balanced, show a surplus, or show a deficit

• Exports create a financial account debit

• Remittances (cash transfers) create a financial account debit

• Funds coming into a country are debits to the account, funds leaving the country are credits to the account.

• Imports create a financial account credit

Which of the following best describes the balance of payments accounts?

• A record of foreign remittances to a country

• A record of all of a country’s exports and imports

• A record of the financial capital inflows and outflows in a country

• A record of a bank’s assets and liabilities

• A record of all international transactions

Which of the following would NOT be included in the current account of Wakanda?

• Remittances from workers in Wizbaland sent back to family members in Wakanda

• Factor income earned by citizens of Wakanda on real assets held in the nation of Housego

• Imports to Wakanda from Hamsterville

• The nation of Maxistan buys a bond from Wakanda

• Exports from Wakanda to the nation of Theopolis

What change will occur in the balance of payments accounts in Wakanda when it sells bonds to Hamsterville?

• The financial account moves to a deficit

• Financial capital inflows increase

• Financial capital outflows increase

• Exports increase

• Remittances increase

Kundu initially had a financial account balance, but then its exports increased.

Which of the following will occur as a result of an increase in exports?

• The current account will equal zero

• The financial account will move to a deficit

• The financial account will equal zero

• The current account will move to a deficit

• The current account and financial account will be equal

Which of the following describes something that would definitely be recorded as an increase in the current account?

• An increase in net exports

• Selling bonds domestically

• Selling bonds to foreign citizens

• An increase in real GDP

• A decrease in factor income earned abroad

Which of the following statements about the current account is accurate?

• It is always negative.

• It is always equal to the financial account.

• It is always positive.

• It is always equal to zero.

• It is not always balanced.

Mr. Frank is a citizen of Gatorland. He wants a better return on his savings than he gets in Gatorland, so he buys newly issued government bonds from the nation of Hamsterville.

How is this purchase counted in the balance of payments in each country?

• A debit in Gatorland’s current account; a credit in Hamsterville current account.

• A debit in Gatorland’s financial account; a credit in Hamsterville's financial account.

• A credit in Gatorland ’s financial account; a debit in Hamsterville financial account.

• A debit in Gatorland’s current account; a credit in Hamsterville current account.

• No impact on Gatorland’s balance of payments; a credit in Hamsterville current account.

Which of the following is FALSE concerning trade?

• Trade balance is equal to exports - imports

• Trade balance can result in a surplus

• Trade surplus in the U.S. started in 1975

• Trade balance can result in a deficit