Question

1.   A country’s balance of payments records:
a.   the prices that a country pays for its imports and the prices that the country receives for its imports.
b.   the flows of value between that country’s residents and residents of the rest of the world during a period of time.
c.   capital gains and losses on a country’s international assets.
d.   the value of a country’s holdings of foreign assets, minus the value of foreign holdings of the country’s assets.

2.   A debit item in the balance of payments is:
a.   any foreign aid received by the country.
b.   an item for which the country must pay.
c.   any exported item.
d.   an item that creates a monetary claim on a foreigner.

3.   A credit item in the balance of payments is:
a.   an item for which the country must be paid.
b.   any loan given out by the country.
c.   any imported item.
d.   an item that creates a monetary claim owed to a foreigner.

4.   The sum of all of the debit items in the balance of payments:
a.   equals the overall balance.
b.   equals the sum of all credit items.
c.   equals ‘compensating’ transactions.
d.   equals the errors and omissions.

5.   An increase in a nation's financial liabilities to foreign residents is a:
a.   reserve inflow.
b.   reserve outflow.
c.   capital imports.
d.   capital exports.

6.   In a country’s balance of payments, which of the following items will be recorded as a debit entry?
a.   Domestic bank balances owned by foreigners are reduced
b.   Foreign bank balances owned by domestic residents are reduced
c.   Assets owned by domestic residents are sold to nonresidents
d.   Securities are sold by
domestic residents to nonresidents

Answer 1

1. Option B

Explanation: The balance of payment records all economic transactions between the residents of a country and the residents of the rest of the world.

2. Option B

Explanation: In the balance of payment a transaction as recorded as a debit when payment is to be made by the country and recorded as a credit when the country is to receive payment.

3.Option A

Explanation:  In the balance of payment a transaction as recorded as a debit when payment is to be made by the country and recorded as a credit when the country is to receive payment.

4. b.   equals the sum of all credit items.

Explanation: The balance of payment, by definition, is always in balance.

answered by: anonymous