Exam 19: The Balance-Of-Payments Accounts

If a U.S. citizen gives $1,000 to a French citizen by writing a check on a New York bank for deposit to the French citizen's New York bank account, the credit item in the U.S. balance-of-payments accounts is __________ and the debit item is __________.

Which one of the following "balances" in a balance-of-payments account has incorporated all private short-term asset changes before arriving at the measure of "balance?"

If a country has a current account deficit, which one of the following is true?

Which one of the following items would be classified as a "debit" in country A's balance-of-payments accounts?

Which one of the following items is a "credit" item in a country's balance-of-payments accounts?

For each of the statements below, explain why the statement is either TRUE or FALSE. (a) "If a country's income is less than its spending, then the country will have a surplus in its current account." (b) "If a country has a merchandise trade deficit, then the country must also have a current account deficit." (c) "If a country's balance on current account is a net debit of $5,000, then the country's capital/financial account balance (including all government capital/ financial flows as well as all private capital/financial flows) must show a net capital/financial inflow of $5,000." (d) "If country A makes a unilateral transfer of $1,000 of goods to country B, then, in this time period and other things equal, country A's merchandise trade balance will be $1,000 more positive than would otherwise have been the case. However, country A's current account balance will be the same as would otherwise have been the case."

Which one of the following items would be a "debit" in a country's balance-of-payments account?

Why might detailed information on the state of the balance of payments be useful to economists and to policymakers? Which of the five "balances" discussed in the text does the U.S. Department of Commerce not publish, and what case can be made for not publishing those balances? What case can be made that those balances should be published?

If a country has a current account deficit, this suggests that

If we compile data on a country's exports and imports of goods and services, its unilateral transfers, and net factor income flows, the resulting net credit or net debit account would be called that country's

Identify and distinguish among, in balance-of-payments accounting, various "balances"that can appear in a country's balance-of-payments statement. What must conceptually be the numerical relationship between a country's "balance on current account" (or "current account balance") and its "capital/financial account balance?" Why? Then, for each of the two statements below, explain why the statement is either True or False. (a) "A rise in interest rates in a country, such as occurred in the United States in the early 1980s, can lead to an increased deficit in the country's merchandise trade balance." (b) "A decrease in saving by households in a country can lead to a deterioration in that country's balance on current account (i.e., can make the current account balance less positive or more negative)."

If, in a country's balance of payments statement, the merchandise trade balance is $-100, services exports and factor income receipts from abroad in total exceed services imports and factor income payments abroad by $25, unilateral transfers made exceed unilateral transfers received by $15, and the long-term financial account has debits exceeding credits by $30, then the country's balance on current account is

Suppose that country A's citizens, firms, and governments own $750 billion of assets in other countries and that foreign citizens, firms, and governments own $850 billion of assets in country A. This situation indicates that country A has a __________ of __________.

Suppose that home country A has the following transactions with foreign countries (represented by foreign country B). For each transaction, indicate and explain the appropriate debit and credit entry in A's balance-of-payments accounts. (a) A firm in country A sells $6,000 of steel to a country B firm. Payment is made by the firm in B drawing down its checking account in a country A commercial bank. (b) Country A citizens give $1,000-worth of cash to country B relatives by writing checks on A-citizen bank accounts in country B. (c) An importer in country A buys $8,000 of apparel from a country-B supplier, paying for the goods by writing a check to be deposited into the B firm's bank account in a country A bank. (d) A citizen of country B buys a long-term bond of a company in country A. The buyer purchases the $5,000 bond by drawing down his/her checking deposit in a bank in A. (e) A firm in country A purchases $3,000 of shipping services from a country B ocean freight carrier, paying for the services by drawing down bank deposits in B owned by the A firm. (f) A's central bank buys $2,000-worth of foreign currency holdings held in a B commercial bank by an A citizen. The central bank adds the foreign currency to its own commercial bank account in country B. Next, using the debit and credit entries that you have constructed, and assuming that these six transactions were the only international transactions during the time period, construct country A's balance-of-payments summary statement for the time period. Indicate the size for country A and explain the meaning of the "balance of trade," "balance on goods and services," "current account balance," "official reserve transactions balance," and "financial account balance."

In balance-of-payments accounting, the acquisition of a foreign production facility by a U.S. firm is a __________ item in the U.S. balance of payments; the deposit of funds in a Foreign bank account by a U.S. citizen __________ item in the U.S. balance of payments.

Other things equal, an export of goods from the United States as a gift to foreigners would lead to an improvement in the U.S. __________ and to no change in the __________.

Suppose that a country A individual investor receives a dividend payment from an investment made abroad, and the payment is made by a deposit of funds into the investor's bank account in the country where the investment is made. The category for the credit entry in this situation would be __________, and the category for the debit entry would be __________.

If a country has a current account deficit, then the country must also have

Suppose that a U.S. importer buys goods from a foreign firm and makes payment by drawing down its New York bank account and transferring the funds to the foreign exporter's bank account in the foreign country. In this situation, the credit entry in the U.S. balance of payments account is __________.

Suppose that a U.S. exporter sells goods to a foreign firm and receives payment by the foreign firm drawing down its New York bank account and transferring the funds to the U.S. exporter's New York bank account. In this situation, the debit entry in the U.S. balance of payments account is _________.