Question PS8 6.6, 6.17, 6.20; PS9 6.53, 6.54, 6.58

04 Jun Question PS8 6.6, 6.17, 6.20; PS9 6.53, 6.54, 6.58

Question
PS8 6.6, 6.17, 6.20; PS9 6.53, 6.54, 6.58

and

PS10 7.4, 7.6, 7.13, 7.26Homework 4
ECON 3171 – 001

Fall 2012

100 Points

Reading Assignment: Ch. 9

Due: Monday, October 22 Student Name: __________________

Multiple Choice Questions. Mark the correct answer for each of the following question(s):

Use the information in the following table to answer questions 1 through 4:

Exports of goods & services $1000

Imports of goods & services $1000

Net change in assets owned abroad $500

Net change in foreign owned assets at home $550

Unilateral transfers received $150

Unilateral transfers paid $200

Investment income paid to foreigners $380

Investment income received from foreigners $400

Balance on the capital account $0

1. The balance on the current account is

A) – $30.

B) $0.

C) $30.

D) $50.

2. The balance on the financial account is

A) -$50.

B) $0.

C) $50.

D) $100.

3. The statistical discrepancy is

A) – $20.

B) – $5.

C) $0.

D) $10.

4. From the domestic economy’s perspective,

A) there is a net international capital inflow equal to $50.

B) there is a net international capital outflow equal to $100.

C) the net international capital flow is zero.

D) its domestic absorption exceeds its GNP by $30.

5. If a country runs a current account surplus and national private savings equals domestic investment,

then the combined governmental accounts

A) must be balanced.

B) must be positive.

C) must be negative.

D) could be either negative or positive, depending on the capital account.

6. If all government budgets are balanced, and S is greater than I, then

A) the net international investment position must be positive.

B) the financial account must be positive.

C) the financial account must be negative.

D) the net international investment position must be negative.

7. The current account balance of the United States began to deteriorate in

A) the late 1960s.

B) the early 1970s.

C) the early 1980s.

D) the late 1980s.

8. The difference between GNP and GDP is

A) GNP includes income received from abroad and excludes income paid abroad.

B) GNP excludes income received from abroad and includes income paid abroad.

C) GNP includes exports and imports.

D) GNP excludes exports and imports.

9. If there is no statistical discrepancy and if there is zero capital account balance, a current account

deficit must imply that

A) the financial account is negative.

B) the financial account is in surplus.

C) exports of goods and services exceed imports of goods and services.

D) unilateral transfers are positive.

2

10. Which of the following is NOT true about a domestic economy’s national income identity: S

+ (T – G) = I + CA

A) If CA is positive, national saving finances the purchase of our goods by foreign countries.

B) If CA is negative, our national saving exceeds our domestic investment.

C) If CA is positive, foreign countries borrow from the domestic economy.

D) If CA is negative and large, a country risks foreigners owning a large piece of its assets.

11. Which of the following is FALSE?

A) Current account deficits occur when domestic investment is less than national savings.

B) Loans from abroad add to a country’s stock of external debt and generate debt service.

C) All countries have external debt.

D) Debt service can become an unsustainable burden that holds back development.

12. Whenever a country’s GNP exceeds its domestic absorption (= C + I + G), it must be true

that

A) this country’s financial account is in surplus.

B) this country’s capital account is in surplus.

C) this country’s current account is in surplus.

D) this country’s GNP must be greater than GDP.

13. Given that personal consumption is $100, national saving is $15, net taxes are $10, government

purchases are $8, the country’s GNP is

A) $113.

B) $115.

C) $118.

D) $123.

14. Given that the capital account balance is zero, statistical discrepancy is zero, and the financial

account balance is $500, it must be true that

A) this country ran a current account surplus of $500.

B) this country has a net international borrowing of $500.

C) this country’s financial account is in deficit

D) this country’s external debt declined.

15. All else equal, an ongoing increase in government budget deficits must decrease

A) the current account deficit.

B) the financial account surplus.

C) the capital account surplus.

D) the national saving.