Multinational Financial Management by Alan Shapiro: The Balance of Payments and International Economic Linkages

CHAPTER 5
The Balance of Payments and International Economic Linkages

EASY (definitional)

5.1 A balance of trade deficit results in a current account
a) deficit
b) surplus
c) IMF intervention
d) World Bank loan

Ans: c
Section: Current account
Level: Easy

5.2 The change in private domestic borrowing or lending required to keep payments in balance without adjusting official reserves is called
a) the net liquidity balance
b) the balance of payments
c) the balance on current account
d) the balance on capital account

Ans: a
Section: Balance-of-payment measures
Level: Easy

5.3 Tourism shows up on the ____ account.
a) merchandise
b) current
c) capital
d) official reserves

Ans: b
Section: Current account
Level: Easy

5.4 The accounting statement that summarizes all the economic transactions between residents of the home country and residents of all other countries is called the
a) balance of trade
b) current account balance
c) balance of payments
d) capital account balance

Ans: c
Section: Balance-of-payment categories
Level: Easy

5.5 The sale of US treasury bonds by a Frenchman shows up as
a) a credit on the capital account
b) a debit on the trade account
c) a credit on the official reserves account
d) none of the above

Ans: d
Section: Capital accounts
Level: Easy

5.6 The sale of American computers to the Spanish government shows up as
a) a debit on the official reserves account
b) a credit on the official reserves account
c) a credit on the trade account
d) a debit on the current account

Ans: c
Section: Current account
Level: Easy

5.7 Recent US trade deficits can be attributed to
a) Japanese protectionism
b) high US wages and benefits
c) lack of American competitiveness abroad
d) the US savings deficit

Ans: d
Section: The international flow of goods
Level: Easy

5.8 The US savings deficit can be attributed, in part, to
a) the growing US budget deficit
b) high real interest rates abroad