Balance of Payments Homework)

Suppose Germany sells more cars to Spain and buys less insurance from Britain.

How do these changes affect the German balance of payments?

• visible exports rise

  invisible imports fall

• visible exports rise

  invisible imports rise

• visible imports fall

  invisible imports fall

• visible imports rise

  invisible imports fall

Many people in Zimbabwe want to buy foreign cars, which would be shipped by foreign companies.

What happens if the Zimbabwe government removes the quota on the import of motor cars?

• balance on trade in goods improves

  balance on trade in services no change

• balance on trade in goods improves

  balance on trade in services worsens

• balance on trade in goods worsens

  balance on trade in services no change

• balance on trade in goods worsens

  balance on trade in services worsens

Which two items, as well as trade in goods and services, are included in the current account of

the balance of payments?

• foreign reserves and international investment

• government spending and international borrowing

• incomes (primary income) and current transfers (secondary income)

• taxation and foreign aid

On a holiday island criminals have frightened away tourists. To give tourists confidence the

government has increased the number of police.

What is likely to happen as a result of such action by the government?

• Overseas earnings fall.

• Public expenditure increases.

• Taxes fall.

• Unemployment increases.

Which of the following would cause a favourable change in the UK trade in services (invisible)

account?

• A Malaysian company increases its exports to the UK.

• A UK holiday company sends more British tourists to Namibia.

• A large UK company increases its exports of goods.

• A UK company wins a contract to transport South African exports.

A newspaper reported that exports from Sweden remained low for five months as changes in the rate of exchange meant that Swedish goods became more expensive to buy abroad.

What else would be likely to happen?

• Imported goods would become cheaper in Sweden.

• Swedish people would switch to buying home-produced goods.

• The Swedish balance of payments would improve.

• The Swedish balance of trade would improve.

The table shows the trade in goods balance and the current account balance for four countries during a year.

Which country had the largest surplus on its trade in services?

• Hon Kong

• Indonesia

• Mexico

• Singapore

What would not be recorded in the current account of Argentina’s balance of payments?

• An Argentine company builds a factory in Kenya.

• An Argentine insurance company insures an American ship.

• Argentine beef is sold to South Africa.

• A large group of Italians visit Argentina.

A country has a surplus on its trade in goods and services of $20 m and a deficit on its current account of $10 m.

What position on its current income balance and current transfer balance is consistent with this?

• A

• B

• C

• D

The diagram shows China’s trade with Brazil for 1999 and 2003 in billions of dollars.

What happened to China’s trade balance with Brazil between 1999 and 2003?

• It experienced a falling surplus.

• It experienced a rising deficit.

• It moved from deficit to surplus.

• It moved from surplus to deficit.