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the balance of payments MCQs

Practise focused the balance of payments questions with marked answers for exam preparation and subject revision.

the balance of payments Mcqs
1. The role of _______ is to direct one nations savings into investments of another nation?
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A. merchandise trade flows

B. current account flows

C. capital flows

D. services flows

2. Purchases of government securities in the United States by foreigners is ?
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A. a credit item in the capital account

B. a debit item in the current account

C. a credit item in the current account

D. a debit item in the capital account

3. All of the following are debit items in the balance of payments except ?
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A. private gifts to foreigners

B. merchandise exports

C. capital outflows

D. foreign aid granted to other nations

4. For the first time since World War I, in the mid-1980s the United States became a net international ?
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A. creditor

B. exporter

C. importer

D. debtor
5. The balance of trade is a record of ?
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A. the current account plus capital account

B. exports and imports of financial assets

C. the value of merchandise exports minus imports

D. the net export of goods and services

6. Which of the following statements is correct ?
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A. If the current accounts is in surplus then the capital account must also be in surplus

B. If the current account is in deficit then the capital account must also be in deficit

C. The overall sum of all entries in the balance of payments must be zero

D. The overall sum of all the entries in the balance of payments must be positive

7. In balance of payments accounting tourism and travel are classified in the ?
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A. unilateral transfers account

B. capital account

C. merchandise trade account

D. services account
8. _______ is needed to balancell the balance of payments statements?
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A. debit transactions

B. statistical discrepancy

C. credit transactions

D. unilateral transfers

9. The argument that U.S current account deficits cause net job losses for Americans ?
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A. is true by definition in all possible circumstances

B. fails to recognize that a current account deficit is matched by an equal inflow of foreign funds which finances employment increasing investment spending

C. is supported by recent U.S history

D. focuses only on the overall economy and is thus always true

10. In the balance of payments travels and tourism are included in the category of ?
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A. unilateral transfers

B. merchandise account

C. services account

D. capital account

11. A current account surplus implies that ?
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A. the country is a net lender to the rest of the world

B. the country is running a net capital account surplus

C. All of the above

D. foreign investment in domestic securities is at very low levels

12. A capital account surplus might be expected to cause a current account deficit because the associated ?
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A. capital inflow would cause the nations currency to appreciate contributing to a trade deficit

B. capital outflow would cause the nations currency to appreciate contributing to a trade deficit

C. capital outflow would cause the nations currency to depreciate contributing to a trade deficit

D. capital inflow would cause the nations currency to depreciate contributing to a trade deficit

13. In the calculation of gross domestic product net exports are ?
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A. short-term capital plus the basic balance

B. the sum of merchandise trade and services

C. the value of merchandise exports minus imports

D. the current account plus long-term capital

14. In the balance of payments the statistical discrepancy is used to ?
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A. insure that the sum of all debits matches the sum of all credits

B. obtain an accurate account of a balance of payments deficit

C. insure that trade imports equals the value of trade exports

D. obtain an accurate account of a balance of payments surplus

15. When a country has a trade deficit it ?
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A. sells more stocks and bonds to the rest of the world than it purchases

B. sells more goods to the rest of the world than it purchases

C. purchases more stocks and bonds from the rest of the world than it sells

D. purchases more goods from the rest of the world than it sells
16. A nation will a current account deficit will be ?
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A. reducing its indebtedness to other nations

B. experiencing a surplus in exports of goods an services

C. going further into debt with other nations

D. lending more money to other nations

17. A country that is a net international debtor initially experiences a (an) ?
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A. larger savings pool available to finance domestic spending

B. higher interest rate which leads to lower domestic investment

C. loss of funds to trading partners overseas

D. decrease in its services exports to other countries

18. The balance of payments is divided into two major accounts the ?
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A. current account the trade account

B. trade account the capital account

C. current account the reserve account

D. current account the capital account
19. Referring to the above table, the U.S balance of international indebtedness suggests that the U.S is a net ?
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A. creditor

B. debtor

C. exporter

D. spender

20. The difference between a countrys balance of payments and its balance of international indebtedness?
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A. is equal to official reserve transactions

B. reflects statistical discrepancies

C. occurs because of foreign exchange fluctuations

D. reflects the difference between flow and stock concepts