Balance of Payments Quiz

What is foreign exchange?

• Currency of one country exchanged for another

• A form of domestic investment

• A type of international trade

• A method of calculating GDP

State two sources of supply of foreign exchange.

• Exports and foreign investments

• Imports and domestic spending

• Government spending and taxes

• Local businesses and tourism

State two sources of demand for foreign exchange.

• Exports and foreign investments

• Government spending and taxes

• Imports and foreign travel

• Local businesses and tourism

Define foreign exchange rate.

• The rate of inflation in a country

• The rate at which goods are exchanged domestically

• The interest rate set by the central bank

• The price of one country's currency in terms of another

Define foreign exchange market.

• A market for government bonds

• A market for domestic investments

• A market where currencies are traded

• A market where goods are traded internationally

What is meant by 'balance of trade'?

• The difference between exports and imports of goods

• The equilibrium in the stock market

• The total value of a country's currency

• The balance between government spending and revenue

What is forward rate?

• The interest rate for future investments

• The rate of economic growth

• The current exchange rate

• The agreed-upon exchange rate for a future date

What are the 3 main components of balance of payments?

• Government spending, taxes, subsidies

• Domestic investment, foreign investment, savings

• Exports, imports, tariffs

• Current account, capital account, financial account

How do you calculate balance of pay?

• By subtracting imports from exports

• By calculating the difference between income and expenditure

• By adding all international transactions

• By balancing the current account and capital account

Describe how the following transaction affects the U.S. Balance of Payments: Columbia University buys several park benches from Spain and pays with $120,000.

• No effect on U.S. Balance of Payments

• Decreases U.S. imports

• Increases U.S. exports

• Increases U.S. imports