Balance of Payments Quiz

What is the balance of payments (BOP)?

• The difference between exports and imports only

• A record of all financial transactions between residents of a country and the rest of the world

• The total value of a country's exports

• The difference between foreign investment and domestic investment

Which of the following is a component of the current account?

• Foreign direct investment

• Portfolio investment

• Trade in goods and services

• Government reserve assets

A deficit in the balance of payments indicates:

• The country is spending more than it is earning internationally

• The country has more exports than imports

• Foreign investment is increasing

• The exchange rate is strengthening

The capital account includes:

• Transfer of goods and services

• Debt forgiveness and transfers of fixed assets

• Tourist expenditures

• Interest payments

When a country has a current account surplus, it means:

• The country is borrowing from other nations

• The exchange rate must depreciate

• The country is a net lender to other countries

• Foreign reserves are decreasing

Which transaction would be recorded as a credit in the BOP?

• Importing cars from Japan

• Buying property in France

• Exporting wheat to Brazil

• Paying dividends to foreign investors

The official reserve account is part of:

• The financial account

• The current account

• The capital account

• The trade balance

A country's balance of payments must always:

• Show a surplus

• Equal zero when all accounts are summed

• Show a deficit

• Match its GDP

Which of the following would improve a country's current account balance?

• Increasing foreign aid payments

• Purchasing foreign stocks

• Reducing imports

• Borrowing from foreign banks

The balance of trade is:

• Always equal to the current account

• The difference between merchandise exports and imports

• Including all financial transactions

• The same as the capital account