ANSWER OUTLINE
ECONOMICS 353 L. Tesfatsion/Fall 2005
EXERCISE 9: 8 POINTS TOTAL DUE: Tuesday, Nov 1, 2:10pm
*IMPORTANT REMINDER: LATE ASSIGNMENTS CANNOT BE ACCEPTED -- NO EXCEPTIONS*
*EXERCISE INSTRUCTIONS:*
(1) Please FILL IN YOUR NAME AND STUDENT ID NUMBER on Side 1 of your
bubble sheet and write "353-EXERCISE 9" in the top margin of Side 1.
(2) Use a #No. 2 pencil# to MARK YOUR ANSWERS on Side 1 of the bubble
sheet to the following eight multiple choice questions (there is no Web
browse question for Exercise 9).
(3) Each question Q1 through Q8 is worth 1 point.
Q1. In HC GDP national income accounting, HC exports consist of all
purchases by ________ of goods and services produced ___________.
A. HC; within the borders of ROW
B B. ROW; within the borders of the HC
C. HC; using ROW-owned assets of production
D. ROW; using HC-owned assets of production
Q2. As conventionally defined in U.S. GDP national income accounting,
the U.S. CAPITAL ACCOUNT KA keeps track of______________ .
A. net payments received by the U.S. from the ROW from the
purchase and sale of pre-existing real assets.
B. net payments received by the U.S. from the ROW from the
purchase and sale of financial assets.
C. U.S. net exports + net factor payments to the U.S. + net transfer
payments to U.S.
D. All of the above.
E E. Only A and B.
Q3. According to U.S. GDP national income accounting principles, which item(s)
below would be directly entered as items in the U.S. CAPITAL account KA:
A. Purchases by Kuwait of suntan lotion newly produced in Florida
B B. Purchase of the U.S. Chrysler company by a German corporation
C. Dividends received by U.S. holders of stock shares in French companies.
D. Purchase of land by the U.S. government from private U.S. ranchers
E. Both B and D
Q4. As conventionally defined in U.S. GDP national income accounting,
the U.S. CURRENT ACCOUNT CA keeps track of______________ .
A. net payments received by the U.S. from the ROW from the
purchase and sale of pre-existing real assets.
B. net payments received by the U.S. from the ROW from the
purchase and sale of financial assets.
C C. U.S. net exports + net factor payments to the U.S. + net transfer
payments to the U.S.
D. All of the above.
E. Only A and B.
Q5. In U.S. GDP national income accounting, the U.S. CURRENT ACCOUNT
CA must, by accounting definition, equal
A. the total value of newly produced goods and services within the U.S.
B. total U.S. investment minus U.S. national saving
C. U.S. net imports
D D. U.S. national saving minus total U.S. investment
Q6. A U.S. CURRENT ACCOUNT ______ indicates that the U.S. is DECREASING its
net claims on foreign assets because the U.S. is _______ the rest of the world.
A. surplus; a net lender to
B B. deficit; a net borrower from
C. surplus; a net borrower from
D. deficit; a net lender to
Q7. Using the definitions for CA, KA, NKA, and BOP as detailed in the online
notes for Mishkin Chapter 20, and assuming the world is divided between the
HC and ROW, the HC balance of payments ACCOUNTING IDENTITY states that
A. the sum of CA and NKA equals BOP.
B. the sum of CA and NKA is zero
C. the sum of CA and KA is 0.
D. BOP is zero.
E E. both A and C.
Q8. Using the definitions for CA, KA, NKA, and BOP as detailed in the online
notes for Mishkin Chapter 20, and assuming the world is divided between the
HC and ROW, the HC is in a balance of payments EQUILIBRIUM if
A A. BOP is zero
B. CA is zero
C. The sum of CA and KA is zero
D. the HC central bank is undertaking official reserve transactions to
ensure an orderly foreign exchange market
E. both A and D
