Question 1

Which of the following transactions would be recorded as a credit item in Canada’s balance of payments?

Accepted Answer

A Canadian firm exports lumber to the United States.

Question 2

Suppose Canada has a current account deficit of $$55.5$$ billion and a capital and financial account surplus of $$45.8$$ billion. What is the statistical discrepancy?

Accepted Answer

$$9.7$$ billion

Question 3

If Canada’s net exports ($$NX) $$are negative, which of the following must be true?

Accepted Answer

Canada’s imports of goods and services exceed its exports.

Question 4

Which equation correctly represents the goods market equilibrium in an open economy when net factor payments ($$NFP) $$are approximately zero?

Accepted Answer

$$S_d = I_d + NX$$

Question 5

If Canada’s official settlement balance increases, what does this indicate about the country’s balance of payments?

Accepted Answer

Financial inflows exceed financial outflows.

Question 6

Which of the following is NOT included in the current account?

Accepted Answer

Direct investment in foreign companies

Question 7

A Canadian bank purchases U.S. government bonds. How is this transaction recorded in the balance of payments?

Accepted Answer

Debit in the capital and financial account

Question 8

If $$CA + KA = 0$$, and the current account is in deficit, what must be true about the capital and financial account?

Accepted Answer

It is in surplus.

Question 9

Which of the following best describes the relationship between national saving, investment, and the current account?

Accepted Answer

$$S_d = I_d + CA$$

Question 10

If Canada’s net foreign assets increase, which of the following must have occurred?

Accepted Answer

Canada has a current account surplus.

Question 11

A Canadian company receives royalty payments from a U.S. firm for intellectual property. In which account and how is this recorded?

Accepted Answer

Credit in the current account

Question 12

Suppose Canada imports a $$75$$ sweater from Britain and pays with Canadian dollars, while Britain uses those dollars to buy a $$75$$ Canadian bond. What is the sum of the current and capital account balances?

Accepted Answer

$$0$$

Question 13

Which of the following would increase Canada’s official settlement balance?

Accepted Answer

A foreign investor purchases Canadian government securities.

Question 14

If the statistical discrepancy in the balance of payments is positive, what does this imply?

Accepted Answer

Measured credits are less than measured debits.

Question 15

Which of the following is an example of a current transfer in the balance of payments?

Accepted Answer

Foreign economic aid received by Canada

Question 16

If $$S_d = I_d + NX$$, and $$S_d = 200$$, $$I_d = 180$$, what is $$NX$$?

Accepted Answer

$$20$$

Question 17

Which of the following would be recorded as a debit in Canada’s capital and financial account?

Accepted Answer

A Canadian investor purchases shares in a U.S. company.

Question 18

If Canada’s current account balance is $$-55.5$$ billion and the capital and financial account balance is $$45.8$$ billion, what is the sum of these two balances?

Accepted Answer

$$-9.7$$ billion

Question 19

Which of the following best explains why the sum of the current account and the capital and financial account is always zero (ignoring statistical discrepancy)?

Accepted Answer

Every international transaction involves both a real and a financial flow.

Question 20

A Canadian resident inherits property in France. How is this transaction recorded?

Accepted Answer

Credit in the capital account

Balance of Payments: Structure, Accounts, and Goods Market Equilibrium in Open Economies

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