What does the balance of trade refer to?
A) The total amount of government debt
B) The difference between a country’s exports and imports of goods
C) The total amount of a country’s currency in circulation
D) The balance of a country’s stock market
Which of the following is included in the balance of payments?
A) Only exports and imports of goods
B) Only foreign exchange reserves
C) All economic transactions between a country and the rest of the world
D) Only government spending
A country with a trade deficit imports more goods than it exports. True or False?
A) True
B) False
Which of the following accounts is part of the current account in the balance of payments?
A) Foreign direct investment
B) Imports of goods and services
C) Loans to foreign countries
D) Stock market transactions
What does a country’s capital account reflect?
A) Imports of goods and services
B) Government spending
C) Cross-border capital flows like investments and loans
D) The money supply within the country
A positive balance of trade indicates:
A) The country is a net importer
B) The country is a net exporter
C) There is no difference between exports and imports
D) There is a balance between imports and exports of services
Which of the following is NOT a component of the balance of payments?
A) Current account
B) Financial account
C) Government budget deficit
D) Capital account
If a country has a trade surplus, it means:
A) Exports are greater than imports
B) Imports are greater than exports
C) Government spending exceeds tax revenue
D) The country is experiencing high inflation
What is the primary purpose of the balance of payments?
A) To measure inflation rates
B) To track a country’s international financial transactions
C) To track interest rates and their effects
D) To determine a country’s credit rating
A current account deficit means:
A) Exports exceed imports
B) The country is borrowing more from foreign countries than it is lending
C) More money is flowing into the country than out
D) The country is running a surplus in its trade of services
Which of the following is NOT a transaction recorded in the capital account?
A) Investment in foreign assets
B) Foreign direct investment
C) Foreign portfolio investment
D) Export of goods
The balance of payments must always balance. What does this mean?
A) The current account is always equal to the capital account
B) A deficit in one account must be balanced by a surplus in another account
C) A country’s exports always match its imports
D) Government spending matches the revenue from exports
What is the main difference between the balance of trade and the balance of payments?
A) The balance of trade includes government spending, while the balance of payments does not
B) The balance of trade is concerned with trade in goods, while the balance of payments includes all financial transactions
C) The balance of trade covers the financial markets, while the balance of payments covers trade of services
D) There is no difference between them
Which of the following would lead to a reduction in a country’s current account deficit?
A) An increase in exports of goods and services
B) A decrease in foreign investments
C) An increase in imports
D) A reduction in foreign loans
What is the financial account in the balance of payments primarily concerned with?
A) The movement of goods and services
B) Changes in foreign reserves
C) Cross-border investments and financial transactions
D) Changes in government spending
Which of the following would be recorded in the balance of payments under the capital account?
A) A loan to a foreign country
B) The export of a country’s goods
C) A change in foreign exchange reserves
D) A foreign company’s purchase of a local business
A country’s balance of payments includes transactions in which of the following areas?
A) Only trade in goods
B) Trade in goods, services, income, and transfers
C) Only government transfers
D) Only foreign investment flows
If a country has a balance of payments surplus, it indicates:
A) The country is borrowing from foreign lenders
B) The country has more money flowing into the economy than out
C) The country’s economy is shrinking
D) The country’s inflation rate is increasing
Which of the following is an example of an inflow in the balance of payments?
A) Imports of goods
B) Foreign direct investment into the country
C) Payments to foreign workers
D) Government aid to other countries
What would be recorded as a credit entry in the balance of payments?
A) A loan received by the country
B) A country’s purchase of foreign assets
C) A foreign country’s purchase of local goods
D) A country paying foreign interest payments
A deficit in the balance of payments may lead to which of the following consequences?
A) Increased foreign reserves
B) Depreciation of the currency
C) High levels of foreign investments
D) Stable trade conditions
Which of the following transactions would be recorded under the current account?
A) An inflow of foreign direct investment
B) A payment for services rendered by a foreign company
C) A foreign country’s purchase of local bonds
D) A loan made to a foreign country
A surplus in the balance of trade indicates that:
A) Imports exceed exports
B) Exports exceed imports
C) The country is borrowing from foreign countries
D) The country’s economy is growing faster than others
Which of the following is true regarding the relationship between the current account and the financial account?
A) A surplus in the current account always leads to a deficit in the financial account
B) A deficit in the current account must be offset by a surplus in the financial account
C) A deficit in the financial account leads to a deficit in the current account
D) There is no relationship between the two accounts
Which of the following would increase a country’s balance of payments surplus?
A) An increase in imports
B) A decrease in foreign loans
C) A decrease in exports
D) A rise in foreign investments into the country
