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Worksheetsessay - why is the balance of payments important in eco
Total questions: 22
Worksheet time: 11mins
Name
Class
Date
1.
the balance of payments is divided into the current account which is
a)
merchandise trade, incomes and transfers
b)
exports and imports - what we owe overseas
c)
exports - imports, incomes and portfolio investment
d)
when we have to pay our debts to other countries as part of external balance
2.
the capital account represents
a)
the movement of money , loans and investments in and out of a country
b)
a surplus on the australian balance of payments
c)
made up of government borrowing, foreign portfolio and foreign direct investment
d)
all of these options are correct
3.
australia has a current account deficit because of the .... component
a)
incomes - paying back loans and returns on investments
b)
transfers - helped those less advantaged as Australia with major aid and humanitarian work
c)
exports - which have been greater than imports as we are a trade based nation
d)
we have invested so much overseas and have to spend our money there
4.
Australia tends to have a trade surplus when the world economy is in a boom because
a)
we are a net importer and in a world boom , richer countries demand is greater
b)
we are able to sell our products due to the depreciation of the global economies
c)
we are a commodity export nation and our major markets take our lwio valued added raw material and transform and value add them
d)
in a world boom , other countries have used their resources and need Australian exports desperately
5.
The balance of payments operates on the basis of credits and debits
a)
Credits on the current account mean money coming into Australia
b)
Debits on the current account mean money that must be paid to the government to cover trade protection
c)
Debits must always be covered by credits or the current account will be out of balance and the government will need to implement external balance policies
d)
on the current account a credit is money entering Australia and a debit is money leaving australia
6.
The current account income deficit is made up of
a)
Lost wages for overseas workers
b)
International remittances
c)
Payments for loans ,profit repatriation , share dividends
d)
The income which must be paid from the GDP to cover the imports and debt
7.
The incomes debit on the current Account is so important and large because
a)
We spend less than we eArn and send that money overseas
b)
we rely so much on foreign investment and borrowing that must be paid back
c)
incomes include the money earned by importers and it must be paid back to where they come from
d)
we have a lot of borrowing on the incomes account to pay for our spending
8.
The capital account is dominated by
a)
Borrowing and investment from overseas to fund our domestic spending and investment
b)
International transfers, remittance and aid
c)
Foreign investment and the importing of capital equipment for future economic growth
d)
Economic growth from new share investment and increased exports
9.
The sale of exported wheat to china would be categorised as
a)
Credit on current account trade balance
b)
Debit on current account exports
c)
Credit on income current account
d)
Credit on capital account official sales
10.
Another example would be when foreign multinational company buys a controlling interest in an Australian company
a)
Credit capitall account portfolio investment
b)
Debit capital account direct investment
c)
Credit capital account direct investment
d)
Credit current account incomes
11.
Not all countries run CAD like Australia . A country that runs a current account where more Money flows in than out is
a)
USA
b)
China
c)
Venezuela
d)
spain
12.
The balance of payments is closely linked to macroeconomic objectives as
a)
price stability and external balance
b)
full employment and external balance
c)
economic growth and external balance
d)
all three options are correct
13.
The balance of payments has a direct influence on
a)
the level of consumer confidence
b)
The level of profitability for the Australian government
c)
The exchange rate and interest rates within the economy and the resultant flow on effects
d)
How many exports and imports we sell and buy and the impact on the circular flow of income
14.
The interrelationship between the bop and the exchange rate is complex but has a major impact on and is determined by the stage of the business cycle -
a)
strong economic growth will see high levels of imports and foreign investment creating growth and the appreciation of the $
b)
Weak economic growth will reduce the cad because Australians won't be spending as much
c)
The balance of payments situation is a major influence on individuals levels of confidence and what they are willing to spend
d)
A country with a high foreign debt will see the currency appreciate as foreigners gain more control over the economy
15.
Exchange rates in Australia are determined by
a)
The rba
b)
The forex market and the forces of supply and demand
c)
The government to ensure external balance is always maintained
d)
It is pegged against our rival trade competitors to give us a big advantage
16.
An appreciation of the $ is a reflection of
a)
The strength of the export sector and the capacity to pay of debt
b)
A strong economy with stability and the currency is in high demand from overseas
c)
A sign of the appreciation nations who buy our resources and are prepared to pay more because of their inelastic demand
d)
All of these options are correct
17.
As in all economic analysis an appreciation of a currency bring both benefits and costs such as
a)
The stronger currency means that it creates a boom
b)
The currency will reach a tipping point called the Marshall Lerner condition where it starts to lose value because the currency is too expensive
c)
Imports become cheaper and this helps ease inflationary pressure but at the same time hurts Australian exports and export based jobs
d)
all of these options are correct
18.
Similarly a depreciating currency created both positive and negative impacts on the economy
a)
Since depreciation is common in recessions it means export sales will struggle
b)
depreciation means the export sector will benefit but the cost of debt will become more difficult to ay if it is excessive
c)
depreciation will improve the CAD but worsen the capital account
d)
non of these options are correct
19.
the exchange rate is influenced by the monetary policy stance of the government because
a)
a contractionary monetary policy will contract the money supply and force up interest rates
b)
in a recession no one buys our exports and so interest rates decrease
c)
the government always moves them in the same direction to maintain external balance
d)
if contractionary monetary policy has higher interest rates than other countries , money will flow in seeking higher returns and appreciate the currency
20.
historically external balance - a stable exchange rate and manageable levels of debt was achieved by
a)
keeping external contact at a minimum so external imbalance can be prevented
b)
high levels of free trade to allow market forces to achieve equilibrium according to classical economic theory
c)
the maintenance of high trade barriers to stop imports and fixed exchange rates to discourage imports and boost exports
d)
only trading with economies who shared the same economic conditions so that imported inflation and exploitation could be avoided
21.
the balance of payments is defined as
a)
the total of all our exports and imports which is a major infection into th circular flow
b)
the most important facet pop economics and long held to be the touchstone of deeper understanding and crucial to explaining what happens in free markets economies
c)
a record of all international transactions of a country within a year
d)
the total value of trade and investment which always balances in an accounting sense
22.
today the dominance of supply side policy has seen external balance become less important because
a)
australia is such a small economic power with less than 0.5 % of world trade so our external contacts are less
b)
government don't have the power to ameliorate the power and dominance of the big economies US China EU and japan who generate over 2/3 of world trade
c)
the dollar has been floated and is no longer controlled by the government and australia is very much about free trade so is reducing protection
d)
the world is so complex economic theory has accepted controlling external balance is impossible and so social equity has become a more important objective given the market failure in market economies of the gap between rich and poor
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