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This set of International Economics Multiple Choice Questions & Answers (MCQs) focuses on International Economics Unit 3 Set 1

Q1 | Which of the following would call for inpayments to the United States?
  • American imports of German steel
  • Gold flowing out of the United States
  • American unilateral transfers to less-developed countries
  • American firms selling insurance to British shipping companies
Q2 | In a country’s balance of payments, which of the following transactions are debits?
  • Domestic bank balances owned by foreigners are decreased
  • Foreign bank balances owned by domestic residents are decreased
  • Assets owned by domestic residents are sold to nonresidents
  • Securities are sold by domestic residents to nonresidents
Q3 | Which of the following is classified as a credit in the U.S. balance of payments?
  • U.S. exports
  • U.S. gifts to other countries
  • A flow of gold out of the U.S.
  • Foreign loans made by U.S. companies
Q4 | What is "immiserizing growth"?
  • Export-biased growth that worsens terms of trade so that a country is worse off as a result.
  • The specialization of low-income countries in production of low-wage products.
  • Trade that hurts the poorest group of people.
  • Improvement in a country's terms of trade at the expense of other countries.
Q5 | What is the "transfer problem"?
  • The fact that international transfers affect terms of trade when they are not taken into account.
  • Rich countries do not transfer a sufficient amount of money to poor countries.
  • Negative effects on a country that transfers money to others.
  • The severe indebtedness of some low-income countries.
Q6 | Unlike the balance of payments, the balance of international indebtedness indicates the international:
  • Investment position of a country at a given moment in time
  • Investment position of a country over a one-year period
  • Trade position of a country at a given moment in time
  • Trade position of a country over a one-year period
Q7 | Which of the following indicates the international investment position of a country at a given moment in time?
  • The balance of payments
  • The capital account of the balance of payments
  • The current account of the balance of payments
  • The balance of international indebtedness
Q8 | Concerning the U.S. balance of payments, which account is defined in essentially the same way as the net export of goods and services, which comprises part of the country’s gross domestic product?
  • Merchandise trade account
  • Goods and services account
  • Current account
  • Capital account
Q9 | If an American receives dividends from the shares of stock she or he owns in Toyota, Inc., a Japanese firm, the transaction would be recorded on the U.S. balance of payments as a:
  • Capital account debit
  • Capital account credit
  • Current account debit
  • Current account credit
Q10 | If the United States government sells military hardware to Saudi Arabia, the transactionwould be recorded on the U.S. balance of payments as a:
  • Current account debit
  • Current account credit
  • Capital account debit
  • Capital account credit
Q11 | The U.S. balance of trade is determined by:
  • Exchange rates
  • Growth of economies overseas
  • Relative prices in world markets
  • All of the above
Q12 | U.S. military aid granted to foreign countries is entered in the:
  • Merchandise trade account
  • Capital account
  • Current account
  • Official settlements account
Q13 | If the U.S. faces a balance-of-payments deficit on the current account, it must run a surplus on:
  • The official settlements account
  • The capital account
  • Either the official settlements account or the capital account
  • Both the official settlements account and the capital account
Q14 | The current account of the U.S. balance of payments does not include:
  • Investment income
  • Merchandise exports and imports
  • The sale of securities to foreigners
  • Unilateral transfers
Q15 | The U.S. has a balance of trade deficit when its:
  • Merchandise exports exceed its merchandise imports
  • Merchandise imports exceed its merchandise exports
  • Goods and services exports exceed its goods and services imports
  • Goods and services imports exceed its goods and services exports
Q16 | The value to American residents of income earned from overseas investments shows up in which account in the U.S. balance of payments?
  • Current account
  • Trade account
  • Unilateral transfers account
  • Capital account
Q17 | What would be the effects of an export subsidy on oil imposed by Russia?
  • Relative world supply of oil rises and relative world demand falls.
  • Relative world supply of oil falls and relative world demand rises.
  • Relative world supply of and relative world demand for oil rise.
  • Relative world supply of and relative world demand for oil fall.
Q18 | What is the Metzler paradox?
  • An export subsidy can lead to an increase in the internal price of the subsidized good.
  • It is the same as immiserizing growth.
  • A tariff on imports can lead to a decline in the internal price of the go
Q19 | A country that is a net international debtor initially experiences:
  • An augmented savings pool available to finance domestic spending
  • A higher interest rate, which leads to lower domestic investment
  • A loss of funds to trading partners overseas
  • A decrease in its services exports to other countries
Q20 | Credit (+) items in the balance of payments correspond to anything that:
  • Involves receipts from foreigners
  • Involves payments to foreigners
  • Decreases the domestic money supply
  • Increases the demand for foreign exchange
Q21 | Debt (–) items in the balance of payments correspond to anything that:
  • Involves receipts from foreigners
  • Involves payments to foreigners
  • Increases the domestic money supply
  • Decreases the demand for foreign exchange
Q22 | When all of the debit or credit items in the balance of payments are combined:
  • Merchandise imports equal merchandise exports
  • Capital imports equal capital exports
  • Services exports equal services imports
  • The total surplus or deficit equals zero
Q23 | In the balance of payments, the statistical discrepancy is used to:
  • Ensure that the sum of all debits matches the sum of all credits
  • Ensure that trade imports equal the value of trade exports
  • Obtain an accurate account of a balance-of-payments deficit
  • Obtain an accurate account of a balance-of-payments surplus
Q24 | All of the following are credit items in the balance of payments, except:
  • Investment inflows
  • Merchandise exports
  • Payments for American services to foreigners
  • Private gifts to foreign residents
Q25 | All of the following are debit items in the balance of payments, except:
  • Capital outflows
  • Merchandise exports
  • Private gifts to foreigners
  • Foreign aid granted to other nations