BEC - Issues at National Level

Question 1

Which of the following is not an account used by the U.S. to account for transactions and balances with other nations (i.e., those not in the U.S. balance of payments statement)?

A. 	Current account.
B. 	Non-current account.
C. 	Capital account.
D. 	Financial account.

Answer 1

B. Non-current account.

There is no “non-current account” in the balance of payments statement. This title is used in financial accounting for private (and other) entities to refer to an account that is not expected to be settled within one year or within the operating cycle of the entity, whichever is longer, but it is not used in connection with accounting and reporting of the U.S. international balance of payments. The other three account titles listed are the components of the U.S. balance of payments statement.

Question 2

Current Account

Answer 2

The “current account” is used in the balance of payments accounting. This account reports the dollar value of:

1. The net of imports and exports of goods and services.
2. The net income from U.S. investments in foreign securities and real estate and foreign investments in U.S. securities and real estate.
3. The net of other transfers out of and into the U.S., including government grants and charitable transfers.

The sum of these items is the current account balance in the balance of payments statement.

Question 3

Capital Account

Answer 3

The “capital account” is used in the balance of payments accounting. This account reports the dollar value of:

1. The net of U.S. purchases of foreign capital (or real) assets and foreign purchases of U.S. capital (or real) assets.
2. The net of U.S. purchases of foreign investment and other financial assets and foreign purchases of U.S. investments and other financial assets.

The sum of these is the capital account balance in the balance of payments accounting.

Question 4

Financial Account

Answer 4

The “financial account” is used in the balance of payments accounting. This account reports the dollar value of:

1. U.S.-owned assets abroad, and
2. Foreign-owned assets in the U.S.

The sum of these is the financial account balance in the balance of payments account.

Question 5

Which one of the following would not be an argument made by U.S. unions in favor of trade protectionism?

A. To protect start-up industries.

B. To protect strategic industries.

C. To increase imports.

D. To reduce unemployment.

Answer 5

C. To increase imports.

Increasing imports would not be one of the arguments that is made in favor of trade protectionism. Trade protectionism seeks to protect domestic producers by restricting, not increasing, the importation of foreign goods and services, generally through imposing tariffs or quotas.

Question 6

Arguments made in favor of trade protectionism:

Answer 6

Protecting start-up industries.

This involves protecting domestic producers by restricting the importation of foreign goods and services, generally through imposing tariffs or quotas.

Protecting strategic industries.

This involves protecting domestic producers by restricting the importation of foreign goods and services, generally through imposing tariffs or quotas.

Reducing unemployment.

protecting domestic producers by restricting the importation of foreign goods and services, generally through imposing tariffs and quotas. By restricting imports, domestic production would increase and, therefore, unemployment would decrease.

Question 7

In the long run, the imposition of an import quota on a commodity is likely to provide the greatest direct benefit to

A. 	domestic consumers of the commodity.
B. 	Domestic suppliers of the commodity.
C. 	Foreign consumers of the commodity.
D. 	Foreign suppliers of the commodity.

Answer 7

B. Domestic suppliers of the commodity.

An import quota will restrict the quantity of a commodity that can be brought into the country from foreign providers.
This limitation on foreign quantity will enable domestic suppliers to sell more of the commodity produced domestically and at a higher price.