Chapter 1 - Balance of Payment accounts

Question 1

Define a credit transaction

Answer 1

any transaction resulting in a receipt from foreigners (inflow) is entered as a credit in the BoP

Question 2

Define a debit transaction

Answer 2

any transaction resulting in a payment to foreigners (an outflow) is entered as a debit in the
BoP [& is given a negative (-) sign]

Question 3

What does a current account do?

Answer 3

An account that registers the imports and exports of goods and services and the payments of
income

Question 4

What does a financial account do?

Answer 4

The financial account records transactions in financial assets

Question 5

Define Direct investment

Answer 5

Changes in holdings of long-term real physical assets and financial assets

Question 6

Where does a donation appear if it is a consumption good, and where does it appear if it is a durable good

Answer 6

Consumption good - current account

durable good - capital account

Question 7

A surplus in the financial account means:

Answer 7

An increase in net indebtedness between the country and the rest of the world

Question 8

Changes in holdings of long-term physical assets and financial assets is called:

Answer 8

Direct investment

Question 8

Non-official transactions in short-term assets is called:

Answer 8

Portfolio investment

Question 9

Reserve assets are:

Answer 9

Readily available to and controlled by monetary authorities, they must be foreign currency assets and assets that actually exist

Question 10

What is the BOP formula:

Answer 10

CA + FA = change in reserves

Question 11

Y =

Answer 11

C + I + G + TB

Question 12

GNI =

Answer 12

C + I + G + TB + PI

Question 13

CA =

Answer 13

TB + PI + SI

Question 14

Define NIIP:

Answer 14

NIIP is a stock account. It is the sum
of current and previous flows on capital, financial and official settlements accounts.

Question 15

CA in terms of Yd =