1.In the balance of payments, capital transactions include all a.transactions in
ID: 1191857 • Letter: 1
Question
1.In the balance of payments, capital transactions include all
a.transactions in which money changes hands
b.flows of capital investments between nations
c.net deficit items
d.net surplus items
2.Although prices in the United States and France may be stable, changes in the exchange rate between dollars and francs can make the actual cost of trade more expensive for one or the other.
True or False
3.In the balance of payments, the settlement account
a.must exactly offset the net deficit or surplus in the other accounts
b.often exceeds the net deficit or surplus in the other accounts
c.is often less than the net deficit or surplus in the other accounts
d.is unrelated to the net deficit or surplus in the other accounts
4.Foreign citizens have been increasing their ownership of U.S. assets. This contributes to a U.S.
a.deficit on current account
b.deficit on capital account
c.surplus on current account
d.surplus on capital account
5.Under a fixed or controlled exchange rate system, if the United States wanted to increase the value of the dollar, it could buy foreign currencies with dollars.
True or False
6.One factor that definitely did not contribute to the deficit in the U.S. balance of payments during 2005 was
a.the war in Iraq
b.sales of military equipment to foreign nations
c.the large federal government deficit in the United States
d.investments abroad by U.S. companies
7.An excise tax can be shifted relatively easily.
True or False
8.Compared to the national debts of major European countries as a percentage of national incomes, the U.S. national debt
a.is the largest
b.is the smallest
c.is at the lower end
d.falls in the highest ten percent
9.The value-added tax is a(n)
a.direct tax
b.indirect tax
c.flat tax
d.income tax
10.Using the budget as an economic stabilizer requires maintaining a continuous deficit.
True or False
Explanation / Answer
1. b flows of capital investments between nations
In BOP, capital transactions are the capital investments across nations
2. True
Changes in the exchange rate will change the relative cost of trade
3. a.must exactly offset the net deficit or surplus in the other accounts
In BOP, adding all components must result in an exact sum of 0.
4. d.surplus on capital account
As more foreign citizens buy US assets, the capital inflows will increase leading to a surplus on capital account
5. False
Buying foreign currencies with dollar will mean the supply of dollars in the market will increase which will cause USD value to depreciate
6. b.sales of military equipment to foreign nations
Sales of military equipment will bring in more money and result in lowering of deficit
7. True
8. is at the lower end
9. b. indirect tax
VAT is paid only when a purchase or sale of a good or service takes place. Thus, it is an indirect tax
10. False. Economic stabilizer would require budget to be either balanced or a surplus.
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