InternationalEconomicsf8e(Krugman)ChapterNationalIncomeAccountingandtheBalanceofPayments12TheNationalIncomeAccountsAcountry'sgrossnationalproduct(GNP)isA)thevalueofallfinalgoodsandservicesproducedbyitsfactorsofproductionandsoldonthemarketinagiventimeperiod.B)thevalueofallintermediategoodsandservicesproducedbyitsfactorsofproductionandsoldonthemarketinagiventimeperiod.C)thevalueofallfinalgoodsproducedbyitsfactorsofproductionandsoldonthemarketinagiventimeperiod.D)thevalueofallfinalgoodsandservicesproducedbyitsfactorsofproductionandsoldonthemarket.E)thevalueofallfinalgoodsandservicesproducedbyitsfactorsofproduction,excludingland,andsoldonthemarketinagiventimeperiod.AnsweAr:QuestionNewStatus:Formostmacroeconomists,A)nationalincomeaccountsandnationaloutputaccountsareequaltoeachother.nationalincomeaccountsexceednationaloutputaccounts.nationaloutputaccountsexceednationalincomeaccounts.D)itisimpossibletotellwhethernationalincomeaccountsequaltonationaloutputaccounts.E)Noneoftheabove.AnsweAr:QuestionNewStatus:Formostmacroeconomists,A)grossnationalincomeandgrossnationalproductarethesame.B)grossnationalincomeexceedsgrossnationalproduct.C)grossnationalproductexceedsgrossnationalproduct.D)itishardtotellwhethergrossnationalincomeequalgrossnationalproduct.E)Noneoftheabove.AnsweAr:QuestionNewStatus:4)ThehighestcomponentofGNPis,ernmentpurchases.D)consumption.E)Noneoftheabove.AnsweDr:QuestionNewStatus:AnexampleofhowGNPaccountsforservicesprovidedbyforeign-ownedcapital(andGDPdoesnot)isA)earningsofSpanishfactorywithBritishownerscountsonlyinSpain'sGDP.B)earningsofSpanishfactorywithBritishownerscountsonlyinBritain'sGNP.C)earningsofSpanishfactorycountsinSpain'sGNPbutarepartofBritain'sGDP.D)earningsofSpanishfactorycountsinSpain'sGDPbutarepartofBritain'sGNP.E)Noneoftheabove.AnsweDr:QuestionNewStatus:ThesaleofA)ausedtextbookdoesenterGNP.B)ausedtextbookdoesnotenterGNP,butthesaleofausedhousedoes.C)bothausedtextbookandausedhousedonotenterGNP.D)ausedhousedoesnotenterGNP,butthesaleofausedbookdoes.E)Noneoftheabove.AnsweCr:QuestionNewStatus:Whichoneofthefollowingstatementsisthemostaccurate?A)Thesaleofausedtextbookdoesgenerateincomeforfactorsofproduction.B)Thesaleofausedtextbookdoesnotgenerateincomeforanyfactorofproduction.C)Thesaleofausedtextbooksometimesdoesandsometimesdoesnotgenerateincomeforfactorsofproduction.D)Itishardtotellwhetherasaleofausedtextbookdoesordoesnotgenerateincomeforfactorsofproduction.E)Noneoftheabove.AnsweBr:QuestionNewStatus:Whichoneofthefollowingstatementsisthemostaccurate?A)GNPplusdepreciationiscallednetnationalproduct(NNP).B)GNPlessdepreciationiscallednetnationalproduct(NNP).C)GNPlessdepreciationiscallednetfactorproduct(NFP).D)AnswersAandCarebothcorrect.E)Noneoftheabove.AnsweBr:QuestionNewStatus:NationalincomeequalsGNPA)lessdepreciation,lessnetunilateraltransfers,lessindirectbusinesstaxes.B)lessdepreciation,plusnetunilateraltransfers,plusindirectbusinesstaxes.C)lessdepreciation,lessnetunilateraltransfers,plusindirectbusinesstaxes.D)plusdepreciation,plusnetunilateraltransfers,lessindirectbusinesstaxes.E)lessdepreciation,plusnetunilateraltransfers,lessindirectbusinesstaxes.AnsweEr:QuestionNewStatus:TheUnitedStatesbegantoreportitsgrossdomesticproduct(GDP)onlysinceA)1900.B)1921.C)1931.D)1941.E)1991.AnsweEr:QuestionNewStatus:GDPissupposedtomeasureA)thevolumeofproductionwithinacountry'sborders.B)thevolumeofservicesgeneratedwithinacountry'sborders.C)thevolumeofproductionofacountry'soutput.D)GNPplusdepreciation.E)Noneoftheabove.AnsweAr:QuestionNewStatus:GNPequalsGDPA)minusnetreceiptsoffactorincomefromtherestoftheworld.B)plusreceiptsoffactorincomefromtherestoftheworld.C)minusreceiptsoffactorincomefromtherestoftheworld.D)plusnetreceiptsoffactorincomefromtherestoftheworld.E)Noneoftheabove.AnsweDr:QuestionNewStatus:MovementsinGDPA)andGNPusuallydonotdiffergreatly.B)andGNPusuallydonotdiffergreatly,asapracticalmatter.C)andGNPusuallydodiffergreatly.D)areusuallysmallerthanthoseofGNPmovements,inpractice.E)Noneoftheabove.AnsweBr:QuestionNewStatus:In2006,theUnitedStateshadasurplusinthecurrentaccount.abalanceinthecurrentaccount.adeficitinthecurrentaccount.D)From2006data,itistoodifficulttodeterminewhetherasurplusoradeficitexistedinthecurrentaccount.Noneoftheabove.AnsweCr:QuestionNewStatus:Netunilateraltransfersarepartofanationalincome.arepartofacountry'sproduct.mustbeaddedtoNNPincalculationsofnationalincome.D)arepartofacountry'sGNP.OnlyAandC.AnsweEr:QuestionNewStatus:GDPisdifferentthanGNPinthatA)itaccountsfornetunilateraltransfers.itdoesnotaccountforindirectbusinesstaxes.itdoesnotaccountforacountry'sproductionusingserviceswithforeign-ownedcapital.D)itaccountsfordepreciation.E)Noneoftheabove.AnsweCr:QuestionNewStatus:Whatarethemainaspectsofeconomiclifethatmacroeconomicsanalysisismostconcernedwith?AnsweTherearefourmainaspects:unemployment,saving,tradeimbalances,andr: moneyandthepricelevel.QuestionNewStatus:Whatcanyoulearnfromthefigurebelow(Figure12-1fromthetext)whichdepictstheU.S.GNPanditscomponentsfortheyear2006?日ill?n3ofotollarsAnsweThehighestcomponentofGNPisconsumptionandtheU.S.hasanegativer: currentbalance.QuestionNewStatus:12.2NationalIncomeAccountingforanOpenEconomyMovementsinGDPA)differgreatlyfrommovementsinGNP.B)donotdiffergreatlyfrommovementsinGNP.C)arenotallowedtodifferatallfrommovementsinGNPbydefinition.D)needtobeinflationadjustedinordertomatchmovementsinGNP.E)Noneoftheabove.AnsweBr:QuestionNewStatus:PurchasesofinventoriesbyA)firmsarenotcountedininvestmentspending.B)firmsarealsocountedininvestmentspending.C)householdsarealsocountedininvestmentspending.D)householdsandFirmsarealsocountedininvestmentspending.E)Noneoftheabove.AnsweBr:QuestionNewStatus:Inopeneconomies,A)savingandinvestmentarenecessarilyequal.B)asinaclosedeconomy,savingandinvestmentarenotnecessarilyequal.C)savingandinvestmentarenotnecessarilyequalastheyareinaclosedeconomy.D)savingandinvestmentarenecessarilyequalcontrarytothecaseofaclosedeconomy.E)Noneoftheabove.AnsweCr:QuestionNewStatus:Investmentisusuallymorevariablethanconsumption.lessvariablethanconsumption.asvariableasconsumption.D)Itishardtotellfromthedatawhetherinvestmentismoreorlessvariablethanconsumption.Noneoftheabove.AnsweAr:QuestionNewStatus:GovernmentpurchasesaredefinedasA)onlygoodspurchasedbyfederal,state,orlocalgovernments.B)allgoodsandservicespurchasedbythefederalgovernment.C)allgoodsandservicespurchasedbythefederalorstategovernment.D)allgoodsandservicespurchasedbythefederal,state,orlocalgovernment.E)Noneoftheabove.AnsweDr:QuestionNewStatus:8GovernmenttransferpaymentslikesocialsecurityandunemploymentbenefitsareA)includedingovernmentpurchases.B)notincludedingovernmentpurchases.C)notincludedingovernmentpurchases,buttheyareincludedintheconsumptioncomponentofGNP.D)notincludedingovernmentpurchases,buttheyarepartoftheinvestmentcomponentofGNP.E)Noneoftheabove.AnsweBr:QuestionNewStatus:In1929,governmentpurchasesaccountedforonly18.5percentofU.S.GNP.only8.5percentofU.S.GNP.28.5percentofU.S.GNP.D)38.5percentofU.S.GNP.E)48.5percentofU.S.GNP.AnsweBr:QuestionNewStatus:Whichoneofthefollowingexpressionsisthemostaccurate?A)CA=EX-IMb)ca=im-exC)CA=EX=IMD)CA=EX+IME)Noneoftheabove.AnsweAr:QuestionNewStatus:Acountry'scurrentaccountA)balanceequalsthechangeinitsnetforeignwealth.B)balanceequalsthechangeinitsforeignwealth.C)surplusequalsthechangeinitsforeignwealth.D)deficitequalsthechangeinitsforeignwealth.E)Noneoftheabove.AnsweAr:QuestionNewStatus:9TheCAisequaltoA)Y-(C-I+G).B)Y+(C+I+G).C)Y-(C+I+G).D)Y-(C+I-G).E)Noneoftheabove.AnsweAr:QuestionNewStatus:Whichofthefollowingistrue?A)Acountrywithacurrentaccountsurplusisearningmorefromitsexportsthanitspendsonimports.B)Acountrycouldfinanceacurrentaccountdeficitbyusingpreviouslyaccumulatedforeignwealthtopayforitsimports.C)Acountrywithacurrentaccountdeficitmustbeincreasingitsnetforeigndebtsbytheamountofthedeficit.D)Wecandescribethecurrentaccountsurplusasthedifferencebetweenincomeandabsorption.E)Alloftheabovearetrue.AnsweEr:QuestionNewStatus:Overthe1980s,A)thereisnoquestionthatalargeincreaseinU.S.foreignassetsdidoccur.B)thereisaquestionwhetheralargedecreaseinU.S.foreignassetsdidoccur.C)thereisnoquestionthatalargedecreaseinU.S.foreignassetsdidoccur.D)thereisnoquestionthattherewasalmostnochangeinU.S.foreignassets.E)Noneoftheabove.AnsweCr:QuestionNewStatus:10Inaclosedeconomy,nationalsavingsometimesequalsinvestment.alwaysequalsinvestment.isalwayslessthaninvestment.isalwaysmorethaninvestment.Noneoftheabove.AnsweBr:QuestionNewStatus:Foropeneconomies,A)S=I.b)s=i+ca.C)S=I-CA.D)S>I+CA.E)S<I+CA.AnsweBr:QuestionNewStatus:Anopeneconomycansaveonlybybuildingupitscapitalstock.cansaveonlybyacquiringforeignwealth.cannotsaveeitherbybuildingupitscapitalstockorbyacquiringforeignwealth.D)cansaveeitherbybuildingupitscapitalstockorbyacquiringforeignwealth.E)Noneoftheabove.AnsweDr:QuestionNewStatus:Aclosedeconomycansaveeitherbybuildingupitscapitalstockorbyacquiringforeignwealth.cansaveonlybybuildingupitscapitalstock.cansaveonlybyacquiringforeignwealth.D)cannotsaveeitherbybuildingupitscapitalstockorbyacquiringforeignwealth.Noneoftheabove.AnsweBr:QuestionNewStatus:17)DisposableincomeisNationalincome11A)lesstaxescollectedfromhouseholdsandfirmsbythegovernment.B)plusnettaxescollectedfromhouseholdsandfirmsbythegovernment.C)lessnettaxescollectedfromhouseholdsandfirmsbythegovernment.D)lessnettaxescollectedfromhouseholdsbythegovernment.E)lessnettaxescollectedfromhouseholdsandfirmsbythegovernment.AnsweEr:QuestionNewStatus:Governmentsavings,Sg,isequaltoA)T-G.B)T+G.C)T=G.D)T+G-I.E)Noneoftheabove.AnsweAr:QuestionNewStatus:Whichofthefollowingisfalseaboutprivatesavingsandgovernmentsavings?A)SP=Y-T-CB)Unlikeprivatesavingdecisions,governmentsavingdecisionsareoftenmadewithaneyetowardtheireffectonoutputandemployment.C)Totalsavings(S)=SP+Sg.D)Thenationalincomeidentitycanhelpustoanalyzethechannelsthroughwhichgovernmentsavingdecisionsinfluencemacroeconomicconditions.E)Noneoftheabove;allstatementsaretrue.AnsweEr:QuestionNewStatus:Inaclosedeconomy,privatesaving,Sp,isequaltoA)I-(G-T).b)i+(g-t).C)I+(G+T).D)I-(G+T).E)I+(G-T)+C.AnsweBr:QuestionNewStatus:Inanopeneconomy,privatesaving,Sp,isequalto12A)I-CA+(G-T).B]I+CA-(G-T).C)I+CA+(G-T).D)I-CA-(G-T).E)I+CA+(G+T).AnsweCr:QuestionNewStatus:Ricardianequivalencearguesthatwhenthegovernmentcutstaxesandraisesitsdeficit,A)consumersanticipatethattheywillfacelowertaxeslatertopayfortheresultinggovernmentdebt.B)consumersanticipatethattheywillhigherservicesfromthegovernment.C)consumersanticipatethattheywillfacehighertaxeslatertopayfortheresultinggovernmentdebt.D)consumersanticipateitwillaffecttheirfuturetaxes,ingeneralinthedirectionofloweringfuturetaxes.E)Noneoftheabove.AnsweCr:QuestionNewStatus:13RicardianequivalencearguesthatwhenthegovernmentA)increasestaxesandraisesitsdeficit,consumersanticipatethattheywillfacehighertaxeslatertopayfortheresultinggovernmentdebt,thuspeoplewillraisetheirownprivatesavingtooffsetthefallingovernmentsaving.cutstaxesanddecreasesitsdeficit,consumersanticipatethattheywillfacehighertaxeslatertopayfortheresultinggovernmentdebt,thuspeoplewillraisetheirownprivatesavingtooffsetthefallingovernmentsaving.cutstaxesandraisesitssurplus,consumersanticipatethattheywillfacehighertaxeslatertopayfortheresultinggovernmentdebt,thuspeoplewillraisetheirownprivatesavingtooffsetthefallingovernmentsaving.D)cutstaxesandraisesitsdeficit,consumersanticipatethattheywillfacelowertaxeslatertopayfortheresultinggovernmentdebt,thuspeoplewillraisetheirownprivatesavingtooffsetthefallingovernmentsaving.E)cutstaxesandraisesitsdeficit,consumersanticipatethattheywillfacehighertaxeslatertopayfortheresultinggovernmentdebt,thuspeoplewillraisetheirownprivatesavingtooffsetthefallingovernmentsaving.AnsweEr:QuestionNewStatus:IntheUnitedStatesoverthepastfiftyyears,thefractionofGNPdevotedtoconsumptionhasfluctuatedinarangeofabout42to49percent.B)32to39percent.22to29percent.D)82to89percent.62to70percent.AnsweEr:QuestionNewStatus:IntheUnitedStates,(gross)investmenthasfluctuatedbetweenofGNPinrecentyears.2and12percent12and22percent22and32percentD)32and42percent42and52percentAnsweBr:QuestionNewStatus:Governmentpurchasescurrentlytakeupabout14A)19percentofU.S.GNP,andthissharehasnotchangedmuchsincethelate1950s.B)38percentofU.S.GNP,andthissharehasnotchangedmuchsincethelate1950s.C)18percentofU.S.GNP,andthissharehasbeenincreasingsincethelate1950s.D)18percentofU.S.GNP,andthissharehasbeendecreasingsincethelate1950s.E)Noneoftheabove.AnsweAr:QuestionNewStatus:15ThepositionoftheUnitedStatescurrentaccountbalancein2007wasA)lentover6percentofitsGNP,resultinginalargecurrentaccountsurplus.B)borrowedover6percentofitsGNP,leadingtoalargecurrentaccountdeficit.C)achievedacurrantaccountbalanceofzero.D)borrowedover10percentofitsGNP,leadingtoalargecurrentaccountdeficit.E)Noneoftheabove.AnsweBr:QuestionNewStatus:Whichoneofthefollowingstatementsisfalse?A)TheUnitedStateshadaccumulatedsubstantialforeignwealthbytheearly1980s.B)The1980switnessedasustainedcurrentaccountdeficitofproportionsunprecedentedinthetwentiethcenturyopenedup.C)In1987,thecountrybecameanetdebtortoforeignersforthefirsttimesinceWorldWarI.D)U.S.foreigndebthascontinuedtogrowandnowstandsat25percentofGNP.E)TheU.S.foreigndebtwaspaidoffinthe1990s,allowingtheU.S.toattainacurrentaccountsurplus.However,thedeficithasreturnedinrecentyears.AnsweEr:QuestionNewStatus:Whatisthenationalincomeidentityforaclosedeconomy?AnsweY=C+I+Gr:QuestionNewStatus:Whatisthenationalincomeidentityforanopeneconomy?AnsweY=C+I+G+EX-IMr:QuestionNewStatus:Discussthevaluesofprivatesavinginclosedandopeneconomies.AnsweInaclosedeconomy,privatesaving,Sp,isequalsto,I+(G-T).Inaopenr: economy,privatesaving,Sp,isequalstoI+CA+(G-T).Openeconomyhelpsinextendingtheopportunitiesforprivatesavingordis-saving,orborrowing.QuestionNewStatus:Discusstheeffectsofgovernmentdeficitsonthecurrentaccount.16AnsweAhardanddifficultissue.DuringtheReaganadministration,thecreationofr: twindeficits,wherebyslashingtaxes,governmentdeficitsincreased,whichwasaccompaniedwithincreasedcurrentaccountdeficits.Usingtheidentity,CA=SP+Sg-IandRicardianequivalence,whicharguesthatanincreaseinthegovernmentdeficit(bydefinitionlowersSg)willcausearoughlyequalincreaseinSPtooffsetanexpectedtaxhikeinthefuture.Thus,forIconstant,thereisroughlynoeffectonthecurrentaccount.However,governmentbudgetdeficitmaychangebothprivatesavingsandinvestment,thusavoidingacreationofthetwindeficits.AnexampleistheEuropeancountriesreducingtheirbudgetdeficitsjustpriortotheintroductionoftheeuroinJanuary1999.Now,underthe"twindeficits:theory,onewouldhaveexpectedtheEU'scurrentaccountsurplusestoincrease.Thishasneverhappened.Themainreasonwassharpreductioninprivatesavingrates.AgoodanswershoulddiscussRicardianequivalencethatarguesthatwhenthegovernmentcuttaxesandraisesitsdeficit,consumersanticipatethattheywillfacehighertaxeslatertopayfortheresultinggovernmentdebt.Inanticipation,theyraisetheirownprivatesavingtooffsetthefallingovernmentsaving.Inaddition,oneshouldmentionwealtheffectinanticipationofoneEurope,assetspricesincreased,loweringprivatesavingrates.QuestionNewStatus:ExplainhowgovernmentdeficitsfellyetcurrentaccountsurplusesremainedthesameintheEUpriortoadoptingtheeuro.Alsoexplainthisinthecontextofthe"twindeficits"theory.AnsweCurrentaccountsdidn'tchangeduetoasharpfallintheprivatesavingrate,r: whichdeclinedbyabout4percentofoutput,almostasmuchastheincreaseingovernmentsaving.Thebehaviorofprivatesaversneutralizedthegovernment'seffortstoraisenationalsaving.Thetwindeficitstheory,theideaofgovernmentdeficitcoupledwithasharplyincreasedcurrentaccountdeficit,expectstheEU'scurrentaccountsurplussharplyasaresultofthefiscalchange,whichdidn'tworkinthiscase.QuestionNewStatus:ExplaintheconceptofRicardianequivalence.AnsweThisaneconomictheoryoftaxesandgovernmentdeficits.Itarguesthatr: whenthegovernmentcutstaxesandraisesitsdeficit,consumersanticipatehighertaxeslatertopayofftheeventualgovernmentdebt.Thus,theywillraisetheirownprivatesavingtooffsetthefallingovernmentsaving.Governmentsthatlowertheirdeficitswillinducetheprivatesectortolower17itsownsaving.doesn'tholdinpractice.EconomistsattributeonlyhalfofthedeclineinHowever,thisEuropeanprivatesavingtoRicardianeffects.QuestionNewStatus:AssumeC=40+0.8(Y-T)G=10I=20T=0,whereTaretaxes.CalculateYatequilibrium.CalculateC,I,andGatequilibrium.Nowassume,EX=5+4EP/PIM=10+0.1(Y-T)-3EP/PE=3P=1.5P=2FindequilibriumYAnswe(a)Y=C+I+Gr: Y=350C=40+0.8Y=320I=20G=10Y=269.1667QuestionNewStatus:18

36)Fillinthefollowingtable:GNPImportsTotalOutputConsumptionConsumptionInvestmentInvestmentGavcrnmentPurchasesExports1(H)2520115751214161207025203069581010321S575303525I40]4014014()Htl940140200300200115。6003002001501250TDD200200150Answer: 一不＞TotalOutputConsumption GovernmentConsumptionInvesJinentInvestmentPurchasesExports1mports1007525ID1(1115753012141612(9加25352030695K10L02332135753035253042014014014014014094(150014020030020011506002003002001501250700200300200150QuestionNewStatus:37)Whatcanonelearnfromthefollowingfigure?notlurcignwealth(bilicnscf面IE「幻I&7Z1即目 1舞5 1M7 1舞與1991 1醉3AnsweThefigureshowstheU.S.currentaccountandnetforeignwealthfrom1977r: until1996.Itshowsthatastringofcurrentaccountdeficitsinthe1980s19reduced wealthuntil,bytheend1996,thecountryhadaccumulatedasubstantialAmerica'snetnetforeigndebt.In1987thecountrybecameanetdebtortoforeignersforforeign thefirsttimesinceWorldWarI.QuestionNewStatus:AssumeC=50+0.6(Y-T)G=15I=15T=2CalculateYatequilibriumCalculateCAssumeEX=4+3EP/PIM=8+0.1(Y-T)-2EP/PE=3P=1P=1.5FindequilibriumYAnswe(a)Y=C+I+Gr: Y=50+0.6(Y-2+15+15)Y=197(b)C=50+0.6(197-2)=117(c) Y=170QuestionNewStatus:Fillinthefollowingtable:GNPTotalOutputConsumplionConsumptionlllVCStiTLCtltInvestmenIGovcrnmi?ntPurchasesExportsImports13510053(130303口1053041X161】2050630口7550151055(1300I〔用2(101出｝402口60975KOO751%)20D6X051108。31K1J007404021K12110100Answer:20

GNPTotalOutputConsumptionConsumptionInvestmentInvestmentGovemiiicntVurchasesExportsImports135M)。4。203U28020口303030105304006力1002050(53050H7550151055。10()2。什501。。8006Q。2004()206。975即口[507515。2006X05008030010030074040040200200100QuestionNewStatus:21

Fillinthefollowingtable:r: ＜r: ＜、 ? l)SO15394025104355(110105-30W3020HI222001405012-2520。140100157040020015020101120020020CA[G1155。2512X50153925UJ4355010510302口222。。50]2-251401001540020020-2K01011200200AnsweQuestionNewStatus:12.3TheBalanceofPaymentsAccountsEveryinternationaltransactionautomaticallyentersthebalanceofpaymentsA)onceeitherasacreditorasadebit.B)twice,onceasacre祖tandonceasadebit.C)onceasacredit.D)twice,bothtimesasdebit.E)Noneoftheabove.AnsweBr:QuestionNewStatus:TheofficialsettlementsbalanceorbalanceofpaymentsisthesumofA)thecurrentaccountbalance,thecapitalaccountbalance,thenonreserveportionofthefinancialaccountbalance,thestatisticaldiscrepancy.B)thecurrentaccountbalanceandthecapitalaccountbalance.C)thecurrentaccountbalance,thecapitalaccountbalance,thenonreserveportionofthefinancialaccountbalance.D)thecurrentaccountbalanceandthenonreserveportionofthefinancialaccountbalance.E)Noneoftheabove.Answer:22QuestionNewStatus:23AnAmericanbuysaJapanesecar,payingbywritingacheckonanaccountwithabankinNewYork.Howwouldthisbeaccountedforinthebalanceofpayments?A)currentaccount,aJapanesegoodimportB)currentaccount,aU.S.goodimportC)financialaccount,aU.S.assetimportD)financialaccount,aU.S.assetexportE)OnlyBandD.AnsweEr:QuestionNewStatus:TheUnitedStatesissuesa$10,000debtforgivenesstoArgentina.Howisthisaccountedforinthebalanceofpayments?A)financialaccount,U.S.assetimportB)currentaccount,ArgentinatransferpaymentC)currentaccount,U.S.serviceexportD)financialaccount,U.S.assetexportE)currentaccount,ArgentinagoodimportAnsweDr:QuestionNewStatus:AU.S.citizenbuysanewlyissuedshareofstockinEngland,payingforhisorderwithacheck,whichtheBritishcompanydepositsinitsownU.S.bankaccountinNewYork.Howisthistransactionaccountedforinthebalanceofpayments?A)financialaccount,U.S.assetexportB)currentaccount,U.S.serviceimportC)currentaccount,BritishgoodexportD)financialaccount,BritishassetimportE)financialaccount,U.S.assetimportAnsweAr:QuestionNewStatus:YoutraveltoParisandpayfora$100dinnerwithyourcreditcard.Howisthisaccountedforinthebalanceofpayments?A)currentaccount,FrenchserviceimportB)currentaccount,U.S.goodexportC)financialaccount,U.S.assetexportD)financialaccount,U.S.assetimportE)Noneoftheabove.AnsweCr:24QuestionNewStatus:TheGermangovernmentcarriesoutanofficialforeignexchangeinterventioninwhichitusesdollarsheldinanAmericanbanktobuyFrenchcurrencyfromitscitizens.Howisthisaccountedforinthebalanceofpayments?A)currentaccount,Frenchgoodexportcurrentaccount,Germangoodimportfinancialaccount,FrenchassetexportD)financialaccount,GermanassetexportE)AlloftheaboveAnsweCr:QuestionNewStatus:25TheearningsofaSpanishfactorywithBritishownersarecountedinSpain'sGDP.arepartofBritain'sGNP.arecountedinBritain'sGDP.D)arepartofSpain'sGNP.E)OnlyAandB.AnsweEr:QuestionNewStatus:TheservicesBritishcapitalprovidesinSpainareaserviceexportfromBritain,A)thereforetheyaresubtractedfromBritishGDPincalculatingBritishGNP.B)thereforetheyareaddedtoSpanishGDPincalculatingSpanishGDP.C)thereforetheyareaddedtoBritishGDPincalculatingBritishGNP.D)OnlyAandB.E)Noneoftheabove.AnsweCr:QuestionNewStatus:UnilateraltransfersbetweencountriesareA)long-termloans.B)internationalgifts,orpaymentsthatdonotcorrespondtothepurchaseofanygood,service,orasset.C)partofthecurrentaccountbutnotapartofnationalincome.D)thedifferencebetweenYandGNPiftheidentityY=C+I+G+CAholdsexactly.E)BothBandD.AnsweEr:QuestionNewStatus:Whichofthefollowingstatementsaboutthecentralbankistrue?A)Onlythecentralbankmayholdforeignreservesandinterveneofficiallyinexchangemarkets.B)Centralbankshavelittlepowertoaltermacroeconomicconditions.C)Today,centralbanks'reservesconsistlargelyofgold.D)TheFederalReserveholdsonlyasmalllevelofofficialreserveassetsotherthangold.E)BothBandCaretrue.AnsweDr:Status:QuestionStatus:26NewHowdoweallocatestatisticaldiscrepancyamongthecurrent,capital,andfinancialaccounts?A)Wehavenowayofknowingexactlyhowtoallocatethisdiscrepancy.B)Dependonthedegreeofcertaintybywhichweattributetotheseaccounts.C)Divideitevenlyamongstthethreeaccounts.D)Dependontheconventionadoptedbythespecificfinancialinstitution.E)Statisticaldiscrepancysignalshumanerrorsmadewhendealingwithfinancialaccounts.AnsweAr:QuestionNewStatus:27Whichofthefollowingistrueaboutcurrentcostmethodandmarketvaluemethod?A)TheyareusedbytheBEAtoplacecurrentvaluesonforeignindirectinvestments.B)Thesemethodsleadtothesamevaluations.C)Basedonthecurrentcostmethod,theBEA's2006estimateofU.S.netforeignwealthwas$2,539.6billion.D)CurrentcostmethodispreferredbytheBEA.E)Noneoftheaboveistrue.AnsweCr:QuestionNewStatus:Whattypesofinternationaltransactionsarerecordedinthebalanceofpaymentaccounts?AnsweThreetypes:transactionsthatinvolveexportsandimportsofgoodandr: services;transactionsthatinvolvethepurchaseorselloffinancialassets;andexportsandimportsofgoodandservices;otheractivitiesresultingintransferofwealthbetweencountrieswhicharerecordedinthecapitalaccount.QuestionNewStatus:"TheBalanceofpaymentsisalwaysbalanced."Discuss.AnsweTrue.Everyinternationaltransactionautomaticallyentersthebalanceofr: paymentstwice,onceasacreditandonceasadebit.