ECON 110 Chapter 35: Chapter 35.docx
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26 Aug 2013
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Chapter 35: exchange rates and the balance of payments. The balance of payments account is a summary record of a country"s transactions with the rest of the world, including the buying and selling of goods, services, and assets. Two main categories to the balance of payments: current account and capital account. The current account is divided into two main sections: the trade account records the value of exports and imports of goods and services. Imports are debits, exports are credits: the capital-service account records the payments and receipts that represent income on assets (like interest and dividends) Payments to foreigners are debits, receipts are credits. This part records payment and receipts arising from the purchase and sale of assets: the purchase of foreign assets is a debit (capital outflow, the sale of assets to foreigners is a credit (capital inflow)
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QUESTION 10
Below is a table for the Balance of Payments of Goegania, a prosperous island nation.
Current Account | Ā | Financial Account | ||||
Exports of Goods | $1,940 | Ā | Capital Inflow | $661 | Ā | |
Imports of Goods | ??? | Ā | Capital Outflow | $347 | Ā | |
Trade Balance | Ā | ??? | Financial Account | Ā | ??? | |
Exports of Services | $569 | Ā | Capital Account | Ā | $0 | |
Imports of Services | ??? | Ā | Statistical Discrepancy | Ā | $0 | |
Services Balance | Ā | $16 | Balance of Payments | Ā | ??? | |
Income Received on Investments | $704 | Ā | Ā | Ā | Ā | |
Income Paid on Investments | $505 | Ā | Ā | Ā | Ā | |
Net Income on Investments | Ā | ??? | Ā | Ā | Ā | |
Net Transfers | Ā | $-168 | Ā | Ā | Ā | |
The balance on the Current Account | Ā | ??? | Ā | Ā | Ā |
Given this information, what is the value for the imports of goods?
Sometimes this question generates some weird numbers. Remember that you would always add the values in a category to get the total. So the total for the Financial Account is always Capital Inflow + Capital Outflow and the Trade Balance is always Exports + Imports for this table. It's just that sometimes those values being added are negative. If you get a negative answer, you should enter in the negative.
Q46. An appreciation of the U. S. dollar would a. encourage foreigners to invest in the United States b. discourage foreigners from buying U. S. goods c. discourage the travel abroad of U. S. citizens d. encourage foreign travel in the United States Q47. The financial account of the balance of payments includes the purchase and sale of physical assets but not of financial assets. a. true b. false Q48. Special Drawing Rights are issued by the a. International Monetary Fund b. Bretton Woods Organization c. General Agreement on Tariffs and Trade d. World Bank Q49. The balance of payments includes a. only exports, imports, and service transactions b. the balance on current account, plus all capital transactions and all official transactions and the statistical discrepancy c. only the official transactions d. all goods and services produced in a nation's economy during a given year Q50. A debit item on the U. S. balance of payments is any transaction that a. results in a loss by U. S. sellers b. results in a loss by U. S. buyers c. makes foreigners use up their holdings of U. S. dollars d. makes U. S. dollars available to foreigners |