Formative Assessment - Balance of Payment

Balance of payment surplus will result in higher demand for domestic currency.

• True

• False

Any nation experiencing a current account deficit must also be running a financial account surplus.

• True

• False

The current account shows ...

• international movement of goods and services
• international movement of capital
• foreign exchange market
• international movement of investments

An increase in the exchange value of one nation's currency in terms of currency of another nation's is called...

• Depreciation of currency
• Appreciation of currency

Prices at which currencies are traded is called...

• Exchange Currency
• Exchange Rate
• Foreign Exchange Market
• Local Currency Demand

Imports involve

• Goods in, money in, positive in Current Account
• Goods in, money out, negative in Current Account
• Goods in, money in, positive in Financial Account
• Goods in, money out, negative in Financial Account

Exports involve

• Goods out, money out, positive in Current Account
• Goods out, money in, positive in Current Account
• Goods out, money in, positive in Financial Account
• Goods out, money out, negative in Current Account

Financial Account transactions include items such as

• Imports
• Exports
• Transfers & Remittances
• Purchase and sale of stocks and bonds

Currency depreciation could be caused by

• Supply Increase or Demand Increase
• Supply Increase or Demand Decrease
• Supply Decrease or Demand Decrease
• Supply Decrease or Demand Increase

Higher income levels in the US would result in

• Increased exports and appreciation of the US Dollar
• Increased exports and depreciation of the US dollar
• Increased imports and appreciation of the US Dollar
• Increased imports and depreciation of the US Dollar