Arizona State University ECN 306 1)If an item in an international transaction results in a resident of a foreign country getting a monetary claim against a resident of the United States, then in the U

Arizona State University

ECN 306

1)If an item in an international transaction results in a resident of a foreign country getting a monetary claim against a resident of the United States, then in the U.S. balance of payments that item is a(n):

•             credit item (or addition).

•             official international reserve.

•             debit item (or subtraction).

•             credit item or a debit item, depending on which foreign country is involved.

2. If a country's net foreign investment is positive, that country:

•             is acting as a net lender to the rest of the world.

•             is acting as a net borrower from the rest of the world.

•             imports more than it exports.

•             is increasing its holdings of official international reserve assets.

3. The three broad categories that make up a country's balance of payments are the:

•             current account, the debt account, and the equity account.

•             financial account, the goods and services account, and the capital account.

•             current account, the financial account, and the changes in official international reserves.

•             financial account, the changes in official international reserves, and the capital account.

4. A country's current account balance:

•             is approximately equal to the difference between the value of the country's domestic production of goods and services and the country's expenditures on goods and services.

•             is approximately equal to the difference between the country's national saving and its

domestic real investment.

•             equals the country's net foreign investment.

•             All of these are correct.

5. The sum of the debit items in the balance of payments equals the:

•             sum of all credit items.

•             overall balance.

•             capital inflows.

•             international investment position.

6. If an Italian investor sells U.S. government securities to a U.S. buyer, how will this item be entered in the balance of payments?

•             It will appear in the trade account as an import.

•             It will appear in the trade account as an export.

•             It will appear in the financial account as an increase in foreign assets held by U.S. residents.

•             It will appear in the financial account as a decrease in the U.S. assets held by foreigners.

7. Importation of goods into a country, purchases by firms in a country of services from firms outside the country, and purchases by investors in a country of equity interests in a corporation outside of the country are all examples of:

•             funds flowing out of the importing or purchasing country.

•             funds flowing into the importing or purchasing country.

•             transactions that are not included in national balance of payments accounting because the transactions are private.

•             transactions that are not included in national balance of payments accounting until they are

completed by the ultimate sale of the items involved.

8. The    is the statement that shows the amounts of a country's foreign assets and foreign liabilities at a point in time.

•             overall balance

•             international investment position

•             financial account

•             balance of payments

9. A country's goods and services balance measures the country's net exports and is often called the country's:

•             financial account.

•             trade balance.

•             international reserve.

•             balance of payments.

10.          is any flow of lending to or purchase of an ownership interest in a foreign entity that is controlled by the domestic entity that makes the loan or purchases the interest in the foreign entity.

•             Direct investment

•             Capital transaction activity

•             Equity transaction activity

•             Financial account surplus