Exam 10: The Balance of Payments

Unilateral transfers refer to two-sided transactions, reflecting the movement of goods and services in one direction with corresponding payments in the other direction.

Concerning a country's business cycle, rapid growth of production and employment is commonly associated with

In the past two decades, the U.S.services balance has generally registered surplus.

Adopting the special drawing right (SDR) as a reserve currency might possibly occur if the United States was to operate continuous bad economic policy in the form of

If a country realizes a current account deficit in its balance-of-payments, it becomes a net supplier of funds to the rest of the world.

If the United States has a negative balance on its current account, it

If Japan lends more to the rest of the world than it borrows from the rest of the world, Japan is a

If the United States is a net borrower from, or lender to, the rest of the world, this is best indicated by the U.S.

Because the United States dollar is the main reserve currency of the world, the U.S.government must pay higher interest rates to foreigners who purchase its securities.

If the current account of the balance-of-payments registers a deficit, the capital account registers a surplus, and vice versa.

If the special drawing right (SDR) was used as an international currency, the cost of doing business would likely go up for firms and investors.This is because another step would be added to international transactions, as buyers and sellers would have to convert their local currencies into SDRs.

For the first time since World War II, the United States became a net international creditor in the mid-1980s and has remained so ever since.

If Japanese investors purchase Treasury bills of the U.S.government, this results in a

If Toyota Inc.of Japan builds an automobile assembly plant in the United States, the Japanese capital account would register an outflow.

Assuming there is a burden from a current account deficit, that burden would have the least impact on a country if the current account deficit is used to finance

To reduce a current account deficit, a country should either decrease the budget deficit of its government or reduce investment spending relative to saving.

The official reserve assets of the United States consist of holdings of gold and foreign corporate securities.

Which of the following represents a problem with the Chinese yuan becoming a reserve currency?

Because a large number of international transactions fail to get recorded, statisticians insert a residual, known as statistical discrepancy, to ensure that total debits equal total credits.

About two-thirds of the world's official foreign exchange reserves are held in