Solutions? f the following is recorded in the U.S. balance of payments 1. foreig

Question

Solutions? f the following is recorded in the U.S. balance of payments 1. foreign investment in the United States I. U.S. investment abroad account? U.S. government deficit or surplus A) III only B) I and II C) I and III D) I, II and III 44) A country's balance of payments accounts record A) the country's net indebtedness to foreigners. B) its international trading, borrowing, and lending. C) the flow of human and nonhuman resources between it and D) only its official transactions with other governments. and its trading partners 45) U.S. official reserves are the A) reserves of U.S. dollars held by the World Bank B) U.S. government's holdings of foreign currency C) reserves of U.S. dollars held by foreign banks D) holdings of foreign currency by the public and the banks rate on a savings 46) In late 2010 the National Bank of Australia offered a 4 percent interest account while Bank of America offered 2 percent. This difference means that A) people expect the U.S. dollar to appreciate to 8 percent against the Australian dollar and interest rate parity to occur B) there will be a surplus of U.S. dollars in the foreign exchange market. C) people expect the U.S. dollar to appreciate by 2 percent against the Australian dollar and interest rate parity to occur D) there will be a shortage of Australian dollars in the foreign exchange markets. 47) The sum of the current account, capital and financial account, and official settlements account is A) a positive number if the country has a trade surplus. B) a negative number if the country has a trade deficit. C) positive or negative depending on whether the domestic exchange rate is appreciating or depreciating. D) always equal to zero. 48) Suppose X-M-net exports; T-G-government sector balance; and S-1- private sector balance. What relationship exists among these variables? A)X-M)+ (T-G)+ (S-1)-0 C(T-G)+X-M) (S -1) D)(T-G)=(X-M)+(S-1) 49) Suppose Italy currently lends 1.5 billion euros to other nations and borrows 1 billion euros

Explanation / Answer

43.

B

These investments are the part of capital account in balance of payment.

44.

B

Any transaction between a country and the rest of the world is recorded in the balance of payment.

45.

B.

Official reserves account shows the foreign currency held by the government.

46.

C

In the given interest rate scenario, the US Dollar will appreciate w.r.t. the Australian dollars and interest rate parity will be achieved.

47.

D

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