Chapter 03
Balance of Payments

True / False Questions

1. Over half of all dollar bills in circulation are held outside American's borders.
True False

Multiple Choice Questions

2. The current account balance, which is the difference between a country's exports and imports, is a component of the country's GNP. Other components of GNP include
A. consumption and investment and government expenditure.
B. consumption and government expenditure and net exports.
C. consumption and net exports and government expenditure.
D. consumption less imports.

3. If the United States imports more than it exports, then this means that
A. the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.
B. the demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus.
C. the U.S. dollar would be under pressure to appreciate against other currencies.
D. both b) and c) are correct

4. Balance of payments
A. is defined as the statistical record of a country's international transactions over a certain period of time presented in the form of a double-entry bookkeeping.
B. provides detailed information concerning the demand and supply of a country's currency.
C. can be used to evaluate the performance of a country in international economic competition.
D. all of the above

5. If a country is grappling with a major balance-of-payment difficulty, it may not be able to expand imports from the outside world. Instead, the country may be tempted to
A. impose measures to restrict imports.
B. impose measures to discourage capital outflows.
C. Both a) and b)
D. None of the above

6. If the United States imports more than it exports, then
A. the supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.