Multiple Choice Answers

1. The current account balance, which is the difference between a country’s exports and imports, is a
component of the country’s GNP. Other components of GNP include
A. Consumption and investment and government expenditure.
B. Consumption and government expenditure and net exports.
C. Consumption and net exports and government expenditure.
D. Consumption less imports.
2. If the United States imports more than it exports, then this means that
A. The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.
B. The demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus.
C. The U.S. dollar would be under pressure to appreciate against other currencies.
D. Both b) and c) are correct
3. Balance of payments
A.
is defined as the statistical record of a country’s international transactions over a certain period of time
presented in the form of a double-entry bookkeeping
B. provides detailed information concerning the demand and supply of a country’s currency
C. can be used to evaluate the performance of a country in international economic competition
D. all of the above
4. If a country is grappling with a major balance-of-payment difficulty, it may not be able to expand imports
from the outside world. Instead, the country may be tempted to
A. impose measures to restrict imports and
B. impose measures to discourage capital outflows
C. Both a) and b)
D. None of the above
5. If the United States imports more than it exports, then
A. The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.
B. One can infer that the U.S. dollar would be under pressure to depreciate against other currencies
C. a) and b)
D. None of the above
6. Generally speaking, any transaction that results in a receipt from foreigners
A. Will be recorded as a debit, with a negative sign, in the U.S. balance of payments
B. Will be recorded as a debit, with a positive sign, in the U.S. balance of payments
C. Will be recorded as a credit, with a negative sign, in the U.S. balance of payments
D. Will be recorded as a credit, with a positive sign, in the U.S. balance of payments
7. Generally speaking, any transaction that results in a payment to foreigners
A. Will be recorded as a debit, with a negative sign, in the U.S. balance of payments
B. Will be recorded as a debit, with a positive sign, in the U.S. balance of payments
C. Will be recorded as a credit, with a negative sign, in the U.S. balance of payments
D. Will be recorded as a credit, with a positive sign, in the U.S. balance of payments
8. If Japan exports more than it imports, then
A. The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.
B. One can infer that the yen would be likely to appreciate against other currencies
C. a) and b)
D. None of the above
9. The balance of payments records
A. Only international trade, (exports and imports).
B. Only cross-border investments (FDI and portfolio investment).
C. Not only international trade, (exports and imports) but also cross-border investments.
D. None of the above
10. Credit entries in the U.S. balance of payments
A. Result from foreign sales of U.S. goods and services, goodwill, financial claims, and real assets.
B. Result from U.S. purchases of foreign goods and services, goodwill, financial claims, and real assets.
C. Give rise to the demand for dollars.
D. Give rise to the supply of dollars.
E. Both a) and c)